How Long Can You Finance a Boat For?

When you take out a loan to purchase a boat, the length of the loan — known as the term — is key to determining your monthly payment and the amount of interest you pay overall. So how long can you finance a boat for? With a boat loan, you may finance your vessel for up to 20 years. However, a shorter term might be better for you, so you may want to explore your options. 

Understanding the types of boat loans and terms available could help you make an informed decision about which is ideal. Here's what you need to know.

Finding Boat Loans

Boats may cost tens of thousands of dollars or more. If you don’t have that kind of cash in your bank account, you could finance your new purchase by getting a boat loan. These are your main options for seeking a loan:

• Dealer financing is a type of loan from the boat retailer. Typically, these loans are done through a bank or other financial institution. 

• Personal loans through banks, credit unions, and online lenders may be used to finance a boat directly. Check with your own bank or credit union first — it may give discounts to current customers. 

• Boat brokers could help you track down the type of boat you’re interested in and potentially help you get a better price. They may also be able to assist you in finding financing in exchange for a commission, which is usually about 10%. Brokers tend to be used for purchases of larger, more expensive boats.

Types of Boat Loans

There are several different types of boat loans. Here’s what each entails: 

Secured Loans

A secured loan typically uses your new boat as collateral. If you fail to repay the loan, the lender could take the boat and sell it to recoup their losses. As a result, lenders often consider secured loans to be less risky, and they may provide options for more favorable terms or a lower interest rate.

Other types of secured loans, such as a home equity loan, which uses the equity you’ve built up in your home as collateral, could also be used to purchase a boat.

Unsecured Loans

An unsecured loan doesn’t require collateral. Because of that, lenders are likely to view these loans as higher risk. To help offset some of that risk, they may charge you a higher interest rate. 

Fixed Interest Rate Loans

Fixed interest rate loans have the same interest rate throughout the length of the loan. Some borrowers may find these loans preferable because it’s easier to budget for monthly payments over the life of the loan. 

Variable Interest Rate Loans

Variable interest rate loans have an interest rate that fluctuates over time. They may start with a relatively low introductory rate that is then adjusted later. If interest rates are on the rise, your interest rate may also rise, making the loan more expensive. You might choose a variable rate loan if you feel that interest rates won’t rise much during the life of the loan. 

Average Boat Loan Term

How long are boat loans? Unlike car loans, boat loans could last up to 20 years. The longer your loan term, the more money you may pay in interest over the life of the loan. Here are the average boat loan term lengths and key details about each.

5-7 Years

Personal unsecured loans for a boat, which require no collateral, tend to have shorter terms of five to seven years. Because you pay the loan off faster, you may pay less in interest over the term of the loan.

15-20 Years

You could potentially finance a boat loan for up to 20 years. A longer term means your monthly payment may be lower. However, the longer your loan term, the more money you might pay over time in interest. That could make these loans more costly in the end than loans with shorter terms.

Using a Personal Loan for a Boat

There are multiple ways to use a personal loan. If you have trouble shopping for a boat loan that has terms or interest rates that suit your needs, you may consider taking out a personal loan for a boat.

Personal loans are usually unsecured loans, but you could get a secured personal loan for a boat and use the boat as collateral. The lender may provide you with a lump sum to cover a large portion or all of the cost of the boat. In exchange, you agree to repay the loan on a regular schedule with interest. The interest rate available to you typically depends on your credit score. In general, borrowers with higher scores are seen as more creditworthy, so lenders are more likely to provide them with options for lower interest rates. 

Borrowers with poor credit are considered less creditworthy, and lenders might charge them higher interest rates to compensate for the increased credit risk. 

Requirements

When you apply for a personal loan, the lender may look at your credit score to help determine whether you meet their lending criteria. Those with poor credit may have a difficult time meeting personal loan requirements. 

Lenders may also want proof of employment and income in order to verify that you have money coming in that you could use to pay back the loan. You may be asked to prove your income with a signed letter from your employer, pay stubs, a W-2, or a copy of your tax return. 

The lender may also look at your debt-to-income ratio (DTI), which measures the amount of preexisting debt you have compared to your income. The lower your DTI, the more attractive you could be to a lender.

Application

You need to follow each lender’s approval process. You could be asked to provide photo ID, proof of address, and proof of income and employment. In addition, a lender might request information such as bank statements. Gather all the required documentation ahead of time to make the application process easier.

Terms

Personal loans tend to range from one to seven years. The shorter the loan, the less you could pay in interest.

Loan Amount

Lenders typically provide a range of loan amount options that you could borrow. For example, you may be able to borrow anywhere from a few hundred dollars to a higher personal loan amount of $100,000. To qualify for a large amount, you may need to have a good or excellent credit score, a solid credit history, and a low DTI. Since you could be charged interest on whatever amount you take out, make sure you borrow only as much as you need.

The Takeaway

There are different types of loans you could use to buy a boat and different terms you may choose from. The longest term for a boat loan is typically 20 years. A personal loan comes with a much shorter repayment term — usually one to seven years. 

As you choose between the loans, be sure to consider the interest rate available to you. And remember, the longer the term of the loan, the longer you could be paying interest, which means the costs may be higher in the long run. 

If you’re looking for a personal loan to finance your boat, Lantern by SoFi can help. With just one application, you can compare offers from multiple lenders in our network.