Once you’ve got your heart set on a boat, finding the right financing is the next step. There are many different boat loans available for borrowers, each with its own terms and conditions that vary from lender to lender.
Secured Boat Loans
Secured boat loans are secured to an asset, also known as collateral, that will be repossessed by the lender in the event the loan cannot be paid. Many secured boat loans are offered by boat dealers or manufacturers, also known as non-traditional lenders. Their loans can usually only be used to finance the boat being purchased, and use the boat as collateral. Many secured boat loans also require a down payment. In many cases, secured boat loans will offer lower interest rates than unsecured loans.
Unsecured Boat Loans
Typically offered by traditional lenders such as banks and financial institutions, an unsecured boat loan is a personal loan that doesn’t require collateral. The interest rates of unsecured loans tend to be higher than a secured boat loan, but they often do not require a down payment.
The value of the boat is completely irrelevant to the lender of an unsecured boat loan, and you can use the funds to cover everything from purchasing the boat outright as well as equipment, gas, and/or insurance, depending on how much you borrow.
Unsecured boat loans are not risk-free, you still have to make timely payments, and not doing so could severely impact your credit score. But with fixed interest and payment rates, you can easily forecast whether or not the loan will fit into your budget. Plus, if the loan offers flexible repayment terms, you can decide upfront if you want to extend your loan to 2 or 5 years to make smaller and more manageable payments, or make larger payments over a shorter term to save money overall.
It’s worth noting a common misconception that unsecured boat loans are not available to those with bad credit–every lender has different requirements and you may qualify for an unsecured boat loan even if your credit score isn’t where you want it to be yet. In many cases, it doesn’t hurt to see if you prequalify!
Choosing the Right Boat Loan
Before you commit to a loan deal, make sure you check out the lender’s background to see if they’re a reputable institution to borrow from. Understanding the rates, terms, and penalty fees involved will arm you with knowledge about how financing works and the repercussions if you’re unable to pay. Always consult a financial advisor with any questions or concerns to give you the confidence to proceed with your boat purchase.