Financing a Boat: How Do Boat Loans Work


For some people, nothing compares to the freedom of sailing the seas or the peace of fishing at your local lake. To enjoy this to the fullest, you must be looking for ways to fulfill your dreams of owning a boat because rarely do they come cheap. 

Getting a loan to finance the boat of your dreams may seem straightforward. A boat is just another vehicle, so it should be just like getting an auto loan, right?

Well, there are some details that make boat loans different from regular vehicle loans. We’re here to lay out all those fine details to help you understand how financing a boat works.


How Do Boat Loans Work?

Boat loans generally work the same way other loans do. That is: an organization lends you a monetary amount based on your credit score to pay for your boat and then you make monthly payments over the life of the loan until you pay off the amount you borrowed.

The life of your boat loan and interest rate may depend on the make and model of the boat you intend to buy and the type of loan you get to pay for it. So, boat loans are pretty much like auto loans, which you might get to pay for a car.

The main difference between boat loans and auto loans is the category of these vehicles. Apart from cars obviously being land vehicles, most boat loan providers classify boats as luxury vehicles, suggesting that they aren’t necessary.

Unlike these institutions, we understand the necessity of boating that makes it far from a luxury item. Sometimes, you might need a boat as part of your livelihood, making the vehicle extremely necessary.

As a credit union, we tend to base your loan’s life and interest rate on your credit score. Here’s a guide to give you an idea of how your credit score can affect the loans you apply for:

  1. Perfect credit (781+): Just like any loan, your stellar credit will get you the best interest and down payment rates. When getting a boat with your 781+ credit score, expect the lowest down payment on your boat, which is around 10% — the best rate going in the marine-lending world.
  2. Good credit (621-780): Even if you’ve done things in the past that ended up hurting your credit score, it’s possible to still get some great interest rates. Plus, the closer to 780 your credit score is, the lower your down payment can be.
  3. Fair credit (581-620): Expect to pay higher interest rates (around 18%) if you have a credit score in this range. You can also expect higher down payment rates between 10% and 20%.
  4. Poor credit (580 and under): Poor credit will give you the highest possible interest rate to make sure you repay the boat loan. Additionally, you can expect to pay a hefty down payment on your boat — that is, if you can finance the loan at all.

So, just like any other type of loan, you get better rates and lower down payments the higher your credit score is. When in doubt, you can consult with our agents so we can help you figure out whether investing in this “luxury item” is the best decision for your current credit score.


What Are the Types of Boat Loans?

You can get either a secured boat loan or an unsecured boat loan. Here’s the rundown:


Secured Boat Loans

A secured boat loan is probably the safest choice you have to pay for your boat. This type of loan requires collateral, which offers the lender protection.

The protection that comes from this loan’s collateral could get you the best (read: lower) interest rates and higher loan limits (read: more money to pay for your boat). The collateral you provide in a secured boat loan is the boat itself.


In other words, if you fail to repay the boat loan you take out, the lending company can take your boat to pay off your loan.


If you don’t want to put your boat as collateral, you could get a home equity loan as your boat loan. This loan uses your home’s equity (or value) as the collateral.

If you get a home equity loan to pay for your boat, you may get longer repayment terms than a regular secured boat loan. But, you might have to pay more interest over time since you’ll be extending the life of your loan.

It should go without saying that home equity loans are only available if your home has enough equity to cover your boat’s value. If you don’t own your home in the first place, check out the other types of boat loans available.


Unsecured Boat Loans

An unsecured boat loan is great if you have a perfect credit score; however, you might end up paying higher interest rates in a shorter time frame. Still, you won’t need to use your boat as collateral for your loan.

The downside of an unsecured boat loan is the consequences of not paying back the loan. Since you have no collateral, the lender may take you to court.

You may also damage your credit score if you fail to repay an unsecured boat loan. This risk explains why getting this type of boat loan is better if you have great credit and don’t mind a decrease.

Another option is to take out a personal loan to pay for your boat instead. This type of loan is an unsecured loan that you can use to finance almost anything.

Interest rates for personal loans may be higher than regular boat loans. Still, you won’t have to use your boat or home equity as collateral if you fail to meet repayment terms.


Keep in mind that some people find repaying a personal loan more difficult as this type of loan can have shorter repayment terms than traditional boat loans.


Be sure to weigh all your options, credit score, and financial situation before deciding on getting any type of boat loan.


Best Boat Brands to Buy

If you’re determined to get a boat loan, check out the best boat brands based on what seasoned boaters have to say:  

  1. Bertram: Bertram boats are classic choices for any boat owner. The brand does not make as many new boats as it used to, but the demand for these boats is still high.
  2. Boston Whaler: Besides its reputation as the “Unsinkable Legend,” Boston Whaler makes boats that have great resale values. The brand makes a total of 38 different models of both luxury boats and fishing boats.
  3. Chaparral: This brand manufactures bowriders, wake surfs, cruisers, and watersports boats. Chaparral consistently scores high in the Boat Trader’s Boating Madness tournament.
  4. Grady-White: These boats have the highest value among both used and new boats on the market. Grady-White is an established brand for fishing boats.
  5. Lund: This brand has been offering aluminum cross-over watersports boats, pontoon boats, and fishing boats since 1948.
  6. MasterCraft: This brand is an established producer of single-mission watersports boats and is quite popular among consumers for its warranty.
  7. Sea Ray: These boats consistently top the Ranker list. Sea Ray boat dealers also appear in the Boating Industry’s top 100 dealers more than any other boat brand dealer.
  8. Tracker: Tracker Boats include pontoons, fishing, and utility boats, all made of aluminum.
  9. Yamaha: This brand produces runabout boats and fishing boats. Consumers consistently rank Yamaha runabouts as their top choice for 19 to 24-foot class boats.
  10. Viking Yachts: This brand is vertically integrated, meaning it maintains quality control by building every piece and part of its yachts.


Why Get a Boat Loan From a Credit Union?

A credit union is a not-for-profit financial institution. That means they offer many benefits, including lower interest rates.

Plus, credit unions are the best alternate options to help finance your boat if your local bank denies you a loan for this “luxury item” due to a low credit score.

If you want to take your chances with a bank, some banks that offer boat loans are the U.S. Bank and Wells Fargo. You might have better rates if you already have a banking relationship with any of these institutions.

Credit unions can operate at the national or local level. In Jacksonville, FL, 121 Financial Credit Union has been serving the community since 1935.

Our financial institution is among the few in Jacksonville that offer boat loans. You can finance up to 100% of your boat, whether it’s new or used.

As a credit union determined to serve our community, we provide boat loan options that let you decide how much you can pay and how long you need funding. 121 Financial has your back as you get your boat.

Back to Blog

Related Articles

How to Get a Car Loan With No Credit History or Bad Credit

Credit is vital when making large purchases and big financial decisions. Big-ticket items like a...

Credit Union Home Loans: Refinancing Your New House

You have many options available to you when seeking to refinance your new house. The financial...

How Do Auto Loans From Credit Unions Work?

If you are looking for a car and need to finance your purchase, there are numerous options...