How to Finance a Boat: Boat Loan Basics

Buying a Boat and need to know the basics about financing the purchase with a boat loan? We asked Tom Smith, President of Sterling Associates, a Financial services firm that provides financing for many types of Boats, some of the most frequently asked questions from Boat buyers.

How do I get a Boat loan?

Financing a boat starts with finding a lender that makes boat loans, having a conversation, and starting an application. Finding a lender that makes boat loans is not a difficult task, now that banks have discovered that most boat buyers are excellent clients for loans. However, there are a bunch of good reasons to work with a Boat loan specialist who devotes funding and staff for the purpose, rather than approaching a lender directly. We interact deeply with the customer on the application, the credit side, analysis, underwriting, and thereby take out the sting that can come with doing financing business with a bank.

Why should I finance my Boat purchase?

Financing can make Boating more accessible, which is why most boat buyers seek a Boat loan. A loan allows you to keep cash in your pocket and, in some cases, deduct interest expense on the Boat loan. Boat financing can make your life easy if you work with someone who understands the Boat loan process and can guide you through every step.

What information do I need to secure a Boat loan?

Before buying a Boat, check your credit history, verify your income and assess your budget: consider down payment, monthly loan payments, upkeep and repairs, and expenses such as insurance and gas. Gather all documentation needed, including a personal financial statement, credit report, and tax returns. In your first meeting with a boat loan specialist, a representative will be sure to collect all the information they need in the initial assessment.

What do lenders look for in a potential Boat buyer?

Obviously, a high net worth appeals to lenders, and they will want to know that you’re not already overextended with other loans. Lenders want to see that you have managed loans of a similar size before. Lenders also look for liquid assets that will cover 12 to 16 months of payments. Steady employment and a primary residence are factored together by a lender as part of the candidate evaluation process.

Do I need Boat owner’s insurance before getting a Boat loan?

Yes, insurance is necessary and will need to be arranged for prior to the loan closing. If you are working with a boat loan specialist, your representative can help by providing a list of reputable boat insurance agencies.

Shouldn’t I just go with the lowest rate for my Boat loan?

A low rate on a boat loan is certainly seductive, but it is not the only factor to consider when securing financing. A Boat loan specialist can help you consider the big picture and factors that might affect your cost over the life of the loan, such as how long you intend to keep the Boat, what the terms are, and if there are any prepayment penalties. An experienced Boat loan Representative will make sure you don’t miss the small print!

What is the typical down payment for a Boat?

The size of the down payment required will depend on the age, price, and type of vessel as well as on your credit profile. Expect to pay 15 to 20 percent down payment on most Center Console or Sportfishing Boats. A Boat loan specialist can help you with programs available through various manufacturers that could allow you to qualify for a lower down payment. They can also help you find lenders that offer lower interest rates for higher down payments.

How long is the typical Boat loan?

Most Boat loans are for 15 or 20 years. Longer terms mean Lower Payment’s, but also more total interest paid. Because Marine Lenders extend longer terms on Boat loans than local Banks and Credit Unions, your monthly payments are likely to be much lower than you expected. Our representatives know what kind of loans lenders are looking for and can match your needs with the lenders most likely to give the lowest rate and most attractive terms.

How long does it take to get approved for a Boat loan?

New Boat loans can be processed and closed in a week, which is much faster and easier than real estate loans. Financing for pre-owned vessels takes longer. However, Boat Loan Specialists, working with Lenders who know the marine industry, can process paperwork faster, provide guidelines of all the things that are needed for a Boat purchase, and refer needed resources. They are, more knowledgeable, faster and easier to work with than a personal banker.

Can I finance a Pre-owned or Used Boat?

Used boats can be financed and most times a Boat Loan Specialist’s terms are the same as on a New Boat. Used boats need a Survey or an Appraisal, to assess its fair market value. A Title examination will be needed to make sure there are no outstanding liens. A Boat loan specialist can help guide you through the process of Financing a pre-owned Boat; in many ways they will act as your Fiduciary and Concierge.

Can I finance a Boat that I will use for charter fishing?

Many lenders will not finance a Boat that is going into Charter since it will be used for commercial purposes. Lenders will allow a Limited Chartering of your Boat up to 20% of its use, but there are specialty lenders and rules for this process.

Can I Finance my Fish finder, Chart plotter, Radar, and other Fishing electronics?

Financing is not only for the price of the Boat. Tangible assets can often be rolled into a Boat loan, including Marine electronics, trolling motor or Anchoring packages and Bottom paint. Note that labor to install the Electronics or perform commissioning tasks for new boats cannot be Financed.

-Tom Smith is President of Sterling Associates, a Financial Services Firm headquartered in Massachusetts that provides Financing, Insurance and Coast Guard Documentation services for all types of boats. Let Sterling get you, “On The Water”!!!