How Does Boat Finance Work?

How Does Boat Finance Work?
  • Opening Intro -

    Compared to automobile loans, boat loans have a fixed rate term loan on which you make payments for a defined duration.


Although opposed to car loans, the financing of a boat could be a much tougher venture. Boats might be more costly than a car, which indicates that the cost of the loan will be bigger, and the duration will also be longer.

The amount you pay to recapitalize a boat can depend on a lot of variables, such as the type of boat loan you are looking to get, the terms of the loan, your deposit, and even your credit rating.

Take a quick look at the various types of boat loans, how they work, and what you need to consider before getting boat finance:

What are the types of boat loans?

  • Secured loans

    Secured boat loans will be using the purchased vessel for collateral. They could have higher borrowing caps, longer maturity periods, and reduced rates versus unsecured loans.

    The downside is that once you default, you will lose the boat.

    Secured loans fit well with applicants who are not eligible for an unsecured loan but who would like a higher loan rate, and who are confident even with the possible consequence of secured loans.

  • Unsecured loans

    The unsecured boat loan will not use the vessel or anything valuable as collateral. However, without this protection, the rates for unsecured loans can be much higher while the terms are shorter.

    You will not risk your boat should you fail to pay an unsecured loan, but you must also suffer the repercussions, such as a compromised credit report and a wage garnishment, once the lender brings you to court.

  • Second mortgage

    Many boat proprietors choose a second form of secured loan called a second mortgage for their boat finance. A type of second mortgage called a home equity loan uses your estate as insurance for your boat loan.

    The Interest rates on this type of secured loan are still less than those of unsecured loans, so they are riskier, and should you ever default, the lending company may take the collateral.

Owning a boat is not as complicated as one would think, and organizing the funding of a boat is similar to car loans.

To apply for boat financing, you can choose from these three options:

  • Negotiate to finance with the dealership –

    Boat dealers arrange boat loans daily, so you will be dealing with people who understand the business, have built connections with creditors, and like to make the whole process work as smoothly and efficiently as possible.

  • Get a bank loan –

    Many buyers with a lot of equity in their homes consider it beneficial to take out a second mortgage or even a home equity loan, simply so they can get a cheaper rate interest to help with the tax.

other valuable tips:
  • Take out a loan from a specialized lender –

    Because boat financing is different from other financing setups, certain creditors invest heavily in it, mainly those acquainted with both the pros and cons of providing boat loans. Be sure to put in work and do your research to learn more boat financing.

If there are any concerns unanswered, ask your boat dealer and make use of the guidance that they can provide. They will be more than happy to help you with your boat loan, and as they’re struggling with similar problems all the time, don’t be afraid to consult them about anything you want to know.

Image Credit: by Pexel

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Sylvia James

Sylvia James is a copywriter and content strategist. She helps businesses stop playing around with content marketing and start seeing the tangible ROI. She loves writing as much as she loves the cake.