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Everything You Need to Know About Personal Loans for Boats

Everything You Need to Know About Personal Loans for Boats
Jason Steele
Jason SteeleUpdated March 28, 2023
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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.
Have you always dreamed of owning a boat but figured you couldn’t afford it? The good news is, there are ways to finance the purchase. You can use a personal loan to buy the boat or take out what’s known as a boat loan.  To help you figure out which option is best for your situation, read on to learn more about a personal loan vs. boat loan, how they each work, and the differences between them.

How Do Boat Loans Work?

Boat loans are typically offered by boat dealers and manufacturers, and sometimes by lenders. A boat loan is typically a secured loan, which means you use the boat as collateral for the loan. If you have strong credit, you might be able to qualify for an unsecured boat loan that doesn’t require collateral to back it. Similar to a car loan, you can often get a boat loan at the same time you purchase a boat. That can make this type of financing convenient. Before applying for a boat loan, it’s a good idea to know your credit score, since you will likely need a good credit score to qualify. Also, the higher your score, the lower your interest rate will be. In general, boat loan interest rates are typically low to begin with — usually in the single digits. However, with a boat loan, you may have to make a down payment of 10% to 20% or more in order to get the loan. 

Personal Loan for a Boat vs. Boat Loan

Personal loans can also be used to purchase a boat. Here’s how personal loans work: A bank, online lender, or credit union lends you a lump sum that you repay with interest in installments over time. Once you’re approved for a personal loan, you may expect to receive funds quickly, typically within one to five days. When deciding whether a boat loan vs. personal loan is the better choice for you, it’s helpful to compare the differences side by side.
Boat LoanPersonal Loan For A Boat
• Interest rates may be lower with a secured boat loan.• Interest rates may be higher with an unsecured personal loan for boat.
• Loan terms can be up to 20 years, depending on the lender, loan type, and value of the boat.• Loan terms are typically shorter, ranging from about two to five years.
• If you default on a secured boat loan that uses the boat as collateral, you could lose your boat.• With an unsecured personal loan, you don’t need collateral. However, if you default on a secured personal loan that uses your boat as collateral, you could lose the boat. 
• Many lenders require a down payment between 10% and 20% or more of the loan amount for a boat loan.• Down payments are typically not required for personal loans.

Pros of Financing a Boat With a Personal Loan

There are several advantages to using a personal loan to finance a boat. One of the biggest benefits is that if you get an unsecured personal loan, you don’t have to use the boat as collateral. In that case, should you default on the loan, the lender can’t take possession of your boat. (Of course, there are other repercussions to defaulting on a loan, like a negative impact to your credit score.)Also, personal loans don’t require down payments like boat loans do. And borrowers with strong credit may qualify for a low interest rate on the loan. One of the other personal loan benefits is that these loans are available in different amounts ranging from around $1,000 to more than $100,000. Depending on the cost of a boat, you can choose the amount that works best for your needs.Finally, personal loans are flexible. The uses of a personal loan are many, including buying a boat. 

Cons of Financing a Boat With a Personal Loan

There are some drawbacks to using a personal loan for a boat. Repayment terms for personal loans are often much shorter than terms for boat loans, so you should calculate whether you’ll be able to repay a large personal loan for a boat within a few years. Interest rates for personal loans can also be higher than they are for boat loans, especially if you don’t have strong credit. In addition, some personal loans may have loan origination fees you’ll have to pay.

Who a Personal Loan for a Boat Is Right For

In  order to qualify for the best deal on a personal loan, you’ll need to meet the personal loan requirements. Borrowers with higher credit scores will likely qualify for the best interest rates and terms. So if your credit is strong, a personal boat loan could be a good option for you.In addition, if you’re buying a boat that isn’t too expensive, you may find more flexibility from a personal loan than from a boat loan. But if you’re purchasing a boat over $100,000, you may not be able to get a large enough personal loan, so a boat loan may be your only option.Recommended: How to Finance a Jet Ski 

Other Ways of Financing a Boat

If neither a boat loan nor a personal loan is right for you, there are other methods of financing a boat you can consider.For instance, you could use a home equity loan to finance a boat. Typically you can borrow up to 85% of the amount of the equity you have in your home, and your house is the collateral for the loan. Home equity loans usually have lower interest rates since they are secured loans, and it may be possible to get one of these loans even if you have bad credit. However, you would need a big enough loan to cover the cost of a boat, which could be difficult to qualify for. Plus, if you fail to repay the loan, the lender could foreclose on your house. Home equity loans may also have expensive closing costs and fees.  Another option is to buy the boat with a credit card. But first, make sure the seller will accept a credit card for the transaction. If they do, you’ll need a credit card with a high credit limit in order to cover the cost. And keep in mind that interest rates on credit cards tend to be quite high. So unless you can pay off the balance fairly quickly, you may end up paying a lot in interest each month. 

The Takeaway

You can use a personal loan or a boat loan to finance the purchase of the boat. A boat loan requires you to put up collateral, while an unsecured personal loan doesn’t. You’ll need to make a down payment with a boat loan; no down payment is necessary with a personal loan. However, a boat loan may have lower interest rates than a personal loan. Consider all the pros and cons of each loan option to decide which is best for you.If you decide to go with a personal loan for a boat, Lantern can help you shop for favorable rates and terms. In our online marketplace, you can get offers from multiple lenders all at once, which makes it convenient to compare and decide on the right loan option for your needs.

Frequently Asked Questions

How does using a personal loan for a boat work?
What are the requirements for getting a personal loan for a boat?
Is using a personal loan for a boat better than getting a boat loan?
Photo credit: iStock/Robert Daly

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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