Owning a boat can mean endless adventures on the water, whether you’re an avid fisherman or skilled sailor. But as with other vehicles, new and used boats often come with a hefty price tag.

The National Boat Owners Association estimates that watercraft can range in cost from $15,000 to upwards of $500,000, depending on the type and size of the boat. Fishing and pontoon boats are on the lower end of that range, while sailboats and yachts come with a higher price point.

Financing is an option if you’re shopping for a new boat. Here’s what to know about boat loans, how they work, and where to get one.

How boat loans work

Boat loans are installment loans you pay back over a set term, which can be as long as 20 years, depending on your lender. These loans typically come with fixed rates, meaning your monthly payments won’t change over time, but some boat loan lenders may also offer adjustable-rate boat loans.

Loan terms and rates vary by lender, so comparing loan options is essential to find a repayment term, monthly payment and rate that align with your financial situation. Having good credit will help you get the best rate and terms, as lenders will do a hard credit pull when you apply.

Types of boat loans

You can get an unsecured or secured boat loan. The key difference between secured and unsecured boat loans is the need for collateral.

Secured loans

Your boat will serve as collateral with a secured boat loan, sometimes called a marine loan or marine financing, and your lender can seize it if you fail to make your monthly payments. Because your loan is secured by your boat, your lender may be willing to offer you a lower interest rate. You may need to make a down payment between 10% and 30% of the vessel’s purchase price, but requirements differ by lender.

Unsecured loans

Lenders don’t require collateral with unsecured loans, but because there’s no asset securing the loan, these loans may have higher rates and stricter credit score requirements. You may see an unsecured personal loan marketed as a boat loan while comparing options from different lenders.

Where to get a boat loan

Several different types of lenders offer boat loans, including:

• Boat dealer

• Specialty marine lender

• Bank

• Credit union

• Online lender

Opting for a loan from a boat dealer can be convenient, but it’s wise to compare loan offers from other providers first. The boat dealer won’t necessarily offer the best rates or terms. Consider prequalifying for a boat loan with a few different lenders before visiting a boat dealer or searching for the perfect watercraft online. This step will give you insight into the potential rates and loan amounts you’d get by working with an independent bank, credit union, or online lender.

​​Note that many lenders may require a strong credit history to qualify for a boat loan. If you have fair or bad credit, it may be more difficult to finance the boat of your dreams.

How to choose a boat financing option and apply

As you’re researching potential boat lenders, consider the following:

• Loan amounts: Does the lender offer loans small or large enough to suit your situation?

• Loan rates and terms: Are annual percentage rates (APRs) competitive? Are you comfortable with the monthly payments and total cost?

• Type of loan: Do you need unsecured or secured loan options?

• Applicable fees: Do any origination fees, prepayment penalties or other fees apply?

• Down payment requirements: Does your lender require a down payment? If so, how much do you need to put down?

• Borrower requirements: What are the credit score, debt-to-income ratio, and financial requirements? Do you need good or excellent credit to qualify?

Once you’ve done your due diligence and found a boat loan that meets your needs, it’s time to apply. The loan application process and timeframe for loan disbursement will vary depending on your lender. You may need to provide the following information:

• Name

• Address

• Social Security number

• Phone number

• Email

• Proof of identity, such as a copy of your driver’s license

• Proof of income, such as recent paystubs

• Proof of address, such as a recent utility bill

• Copies of bank statements

• Copies of past tax returns

• Information about the boat you’d like to purchase

• Loan amount you’re seeking

Read more: How to choose between a personal loan vs. a credit card

FAQs

How long can you finance a boat?

Boat loan terms vary by lender, but they can be as long as 20 years. You’ll likely get a shorter term of up to five or seven years if you choose an unsecured personal loan. Secured marine loans generally come with longer repayment terms.

Should I take out a home equity loan to buy a boat?

If you have substantial equity in your home and can get a home equity loan with a low rate, going this route may be a good choice. But if a boat loan would offer a lower rate, that type of financing would likely be a better option. Keep in mind, too, that home equity loans often include expensive closing costs, plus your home would be at risk if you default.

What’s a good interest rate for a boat loan?

Boat loan rates vary widely by lender but generally start around 7% for borrowers with excellent credit. Prequalifying for boat loans from different lenders can provide insight into whether or not a particular lender offers competitive rates.