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How Long Can You Finance a Boat For?

How Long Can You Finance a Boat For?
Austin Kilham
Austin KilhamUpdated September 16, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
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 interest rate. So how long can you finance a boat? With a boat loan, you can typically finance your vessel for up to 20 years. However, a shorter term might be better for you, so you’ll want to explore your options. Understanding the types of loans available and the boat financing terms can help you make an informed decision about which is best. Here's what you need to know.

Finding Boat Loans

As you’re looking at boats you’ll discover that the boat cost can vary widely. Boats are typically tens of thousands of dollars. If you don’t have that kind of cash in your bank account, you can finance your new purchase by getting a boat loan designed specifically for water craft. These are your main options for finding 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. Banks, credit unions, and online lenders offer boat loans directly. Check with your own bank or credit union first—they may give discounts to current customers.  A boat broker can 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 can 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 offer you 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, can 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

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

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 can last for many years. The longer your loan term, the more money you’ll pay in interest over the life of the loan. Here are the average boat loan term lengths and what you should know about each.

5 to 7 Years

Unsecured loans for a boat, which require no collateral, tend to have shorter terms of 5 to 7 years. Because you pay the loan off faster, the less you’ll pay in interest over the term of the loan.

15-20 years

You can typically 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’ll pay over time in interest. That can 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 finding 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. The lender will offer you a lump sum with few, if any, spending restrictions. In exchange, you agree to repay the loan on a regular schedule with interest. The interest rate you’re offered will largely depend on your credit score. In general, borrowers with higher scores are seen as more creditworthy, so lenders are more likely to offer them lower interest rates. Borrowers with poor credit are considered less creditworthy, and lenders will usually charge them higher interest rates to compensate for the increased credit risk. 

Requirements

When you apply for a personal loan, the lender will look at your credit score to help determine whether to offer you a loan. Those with poor credit may have a difficult time  meeting personal loan requirementsMost lenders will also want proof of employment and income in order to verify that you have money coming in you can 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 pre-existing debt you have compared to your income. The lower your DTI, the more attractive you’ll be to a lender.

Application

You’ll need to follow each lender’s approval process. You’ll typically 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 two to seven years. The shorter the loan, the less you’ll pay in interest.

Loan Amount

Lenders typically offer a range of loan amounts that you can borrow. For example, you may be able to borrow anywhere from a few hundred dollars to the highest personal loan amount of $100,000 dollars. To qualify for a large amount, you’ll need to have a good or excellent credit score, a solid credit history, and a low DTI. Since you’ll 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 can use to buy a boat. The type of loan you choose helps determine the length of the loan. A boat loan will allow you to purchase a boat and repay what you borrow for up to 20 years. A personal loan comes with a much shorter repayment term—usually 5 to 7 years. As you choose between the loans, be sure to consider the interest rate you’re offered. And remember the longer the term of the loan, the longer you’ll be paying interest, which means the costs may be higher in the long run. 

3 Personal Loan Tips

  1. Shopping around helps ensure that you’re getting the best deal you can. Lantern by SoFi makes this easy. With one online application, you can find and compare personal loan offers from multiple lenders.
  2. Read lender reviews before taking out a personal loan. You’ll get a sense of how long it can take to receive the funds and how good the customer service is.
  3. Don’t assume that if you have bad credit, you can’t get a personal loan. There are lenders who specialize in bad credit loans.  

Photo credit: iStock/AscentXmedia
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCPL0722019

Frequently Asked Questions

How many years do lenders finance a boat?
What are the benefits of longer boat loans?
Who determines the term of the boat loan?

About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
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