How to Finance a Boat

If you dream of sunny days spent captaining a boat of your own, you may also be wondering how to finance a boat. With more than 12 million registered boats in the U.S., you are not alone. Boat loans make it possible for many boat owners to purchase vessels they could not otherwise afford.

What is a boat loan?

A boat loan allows you to borrow money to finance a new or used boat. Those funds are typically paid back in monthly payments.

How do boat loans work?

Learning how to finance a boat is easy if you have ever financed a car because the process is similar. Some lenders require a down payment of between 10% to 20%. Certain lenders allow you to tack extras -- like life jackets and other safety gear -- onto the loan.

The loan will either be secured or unsecured, although boat loans are usually secured. In a secured loan, the boat you finance acts as collateral. While the lender will generally offer a lower interest rate for a loan with collateral, they also have a legal right to repossess it if you miss payments. There are also unsecured boat loans, which we will discuss a bit later.

Boat financing is a serious business. Boat loans can stretch up to 20 years, and the decision to commit to a loan that long can have a long-lasting impact on your personal finances. What financing options are available for boats?

Here are some of the ways you can finance your boat:

Bank or credit union: If you're comfortable with your current bank or credit union, it makes sense to learn what they have to offer in the way of boat loans. Once approved, the lender will either give you a check for the amount financed or send it directly to the dealer. Boat loans through banks and credit unions are secured, with the boat serving as collateral. Trident Funding is a boat loan company located in Newport Beach, California. Marine Boat Loan Company offers Marine Finance Loan for yachts, sailboats.

Marine financing: If you shop for a boat through a dealership, your dealer should know how to finance a boat and tell you about marine financing. The National Marine Lenders Association lists qualified lenders (normally based on their experience with boat financing). While rate shopping, make sure to ask your dealer which marine lender it recommends. As banks and credit unions, marine lenders consider the boat as collateral.

Online lenders: You will find that the interest rates charged on personal loans vary widely, as do repayment terms. Some personal loans are secured, but many of the best personal loans are unsecured. The interest rate on an unsecured loan is likely to be higher and the repayment term shorter because you haven't put up any collateral. However, your boat will not be repossessed if you miss payments. That said, missing payments on any loan is bad for your credit and should be avoided.

Individual seller financing: As popular as boating is, there is a saying that holds water for some. It goes like this: "The two happiest days in a sailors' life are the day he buys his boat, and the day he sells it." That's because boats can be expensive to operate and store. They can also be a hassle to repair, especially if you are not mechanical. Sometimes, to rid themselves of a boat, a seller offers to finance it. If you go this route, make sure the seller is charging a competitive price and interest rate. Do not be surprised if a seller wants to run a credit check to make sure you are good for the payments. You can also count on signing a purchase agreement.