Anytime you see an item with a price tag that ends in a comma and three zeros, think twice about borrowing money to afford it.
That goes for boats too.
Boat loans — and other personal loan options — might get you out onto the water faster. But they also can sink your finances if you’re not careful.
How to spot the best boat loans
If you type the words “boat loans” into your browser, it won’t take long to be inundated with offers from banks, lenders, and associations. Many of them will help you finance the down payment of 10% to 15% on a new or used boat or equip you with enough cash to buy one in full at the dealership.
You’ll notice some trends about these offers. Many require that you borrow a minimum of $5,000 and allow you to borrow as much as six figures, for example.
As with other kinds of online personal loans, you’ll be able to fill out an application and receive a preapproval (or rejection) in as little as 24 hours.
Your credit could make or break your chances of approval. To qualify for boat loans from Boat Owners Association of The United States, for example, you need a credit score of at least 680. Similarly, Bank of the West says its “preferred” range starts at 670.
Your credit score won’t just get you in the door. It also will decide your interest rate.
Some lenders list rate ranges, showing that you can score a better rate by borrowing more money. As of April 20, 2018, SunTrust Bank, for example, offered rates between 5.44% and 9.69% for a $5,000 boat loan with a term of 24 to 36 months.
For a $10,000 loan with the same term, its rate range decreased to 4.04% to 7.59%. Make sure to check with SunTrust Bank for the latest available rates.
Don’t be fooled by lenders that list only their lowest possible rates. You’ll want to compare the rates you can qualify for based on your credit. Also, unlike typical personal loans, which are repaid in five years or less, some lenders might offer repayment terms of a decade or longer.
Still, to secure the best possible boat loan, avoid the following:
- Variable or “floating” interest rates that can change over time
- Prepayment penalties for repaying the loan early
- Repayment terms that don’t fit your financial situation
No matter where you apply for boat loans or top-rated personal loans, you’ll need to provide financial documents to prove you can afford the boat you’d like to captain.
Consider the downsides of boat loans
Using a loan to buy a boat allows you to set sail much faster.
However, purchasing a boat is a lot like driving a new car off the lot — it begins to lose its value almost immediately. Some estimates say your boat’s value could drop by as much as 20% within a year.
That’s the problem with using a form of credit to buy a depreciating asset. You’ll repay more over time than what the boat is worth.
Worst of all, if you can’t make your payments on a boat loan that’s a secured personal loan, the boat will be the first thing you lose. Secured loans require you to put up collateral that can be seized when repayment goes south.
If you take out a boat loan that’s an unsecured personal loan and struggle in repayment, you might be at risk of dealing with a collections agency and having your wages garnished. Neither scenario is something to look forward to.
If you decide to borrow money to pay for a boat, come up with a plan for repayment before signing your name on the dotted line. This way, you’ll fully appreciate how much interest you’ll be responsible for over the long haul.
Say you take out an unsecured personal loan for $10,000 at a fixed rate of 15.00%. Over a five-year repayment term, you’ll fork over a total of $14,274, including $4,274 in interest.
Use our personal loan calculator to consider other scenarios. Even if you have excellent credit and qualify for a low, fixed rate on a boat loan, you’ll want to see how much the loan really will cost you.
Avoid boat loans if you can by budgeting for your purchase
Setting a savings goal isn’t the fastest way to head out to sea, but it’s the most responsible.
You could start by creating a line item on your budget. Put aside a certain amount of each paycheck. Add it to whatever savings you can afford to part with and wait until you have the amount you need.
Say you’re eyeing a $30,000 boat, for example, and have $20,000 in extra savings. You could cover that $10,000 gap by setting aside an extra $500 over the next 20 months. You’ll miss a couple of summer seasons, but you won’t have to worry about paying off debt.
Although your boat will lose value over time, you also could strategize ways to increase its value to you. For example, rent it out instead of letting sit on the dock when you’re not using it. You might consider listing it on a website like GetMyBoat — one of a handful of ways to make money off your property.
Buying a boat isn’t among the best uses of a personal loan. If you decide borrowing is your best option, however, at least ensure you’ll be equipped to pay off the loan before your repayment term expires.
After all, you won’t be able to enjoy the wind blowing through your hair when there’s a big debt weighing on your mind.
Note: Student Loan Hero has independently collected the above information related to boat loan rates, terms, and credit score requirements. Boat Owners Association of The United States, Bank of the West, and SunTrust Bank have neither provided nor reviewed the information shared in this article.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|