Boat financing

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on July 19, 2024. Next review due October 1, 2025.

    Although millions of US businesses own cars, trucks and vans for commercial use, many organizations also need boats to provide the goods and services they sell. Commercial water craft can be used for fishing, mining, haulage, passenger and vehicle transport, leisure activities and many other functions.

    Depending on the age, type and size of craft, boats for commercial use can cost anywhere from the tens of thousands up to the millions of dollars – which is why business (and private) boat owners will typically use boat financing to buy the craft they need. Boat loans reduce the financial pressures of buying a new or used boat, letting the boat buyer pay over time instead of all at once. Financing may also let the boat buyer obtain a better boat than they may be able to afford if they were paying with cash.

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      How do boat loans work?

      Boat loans function like auto loans – you borrow all or some of the cost of the boat you’re buying and then you pay the principal back, plus interest charges and any fees, over time. You may have to make a down payment, but this can vary from 0% up to +20% of the purchase price depending on your financial situation, and the type and value of the boat you buy. 

      Because boats can be considerably more expensive than cars, boat owners usually pay them back over much longer periods – often up to 20 years.

      Types of boat loans

      You can use boat financing to buy new or used boats and for almost any type of craft – commercial, pleasure, marine, lake and river – but they will either be secured or unsecured, which means collateral may or may not be required:

      Secured loans

      Secured loans use collateral to protect the lender in case the borrower defaults. For boat buyers, this typically means the boat they are buying is the collateral and the lender retains a lien over the boat until they are paid back in full. The lender has the right to seize the boat and sell it to recover their money if you default during the term of the loan. Most boat loans are secured. 

      Advantages of a secured boat loan:

      • You can usually borrow larger sums when they are secured. This means you may be able to get a better boat.
      • Interest rates are typically lower than you may find with unsecured loans.
      • You may be able to obtain a secured boat loan with weaker credit.

      Disadvantages of a secured boat loan:

      • The lender can repossess and sell the boat if you fail to repay.

      Unsecured loans

      Unsecured loans require no collateral – either the boat or any other asset from the buyer. Because the lender has no collateral that they can quickly sell to recoup their money, they carry more risk with an unsecured loan and will usually charge a higher interest rate. You will also typically need very good credit, a low debt to income ratio, and good cash flow to qualify for this type of business loan. Be aware that just because the loan is unsecured, that does not mean the lender cannot pursue you if you default. In such case, the lender may sue to recover their money, which could put your business and personal assets at risk.

      Advantages of an unsecured boat loan:

      • No need to provide any collateral.

      Disadvantages of an unsecured boat loan:

      • You will usually need very good credit and a low debt to income ratio to qualify.
      • Higher interest rates than secured loans.
      • Smaller loan sums may be available – this could affect the type of boat you buy.

      What is the interest rate on a boat loan?

      Interest rates on boat loans typically start around 7.49%, but the actual rate you pay will be determined by the price and type of boat you’re buying, the size of your down payment, and your financial history.

      Where can I get a boat loan?

      Boat loans can be obtained from online lenders, banks, credit unions and some specialist marine finance lenders.

      What to consider before applying for a boat loan

      The price and type of boat you want to buy are not the only things you must consider before applying for boat financing:

      • Can you qualify?

      Boat loans can involve very large sums of money, so you should ensure that you meet the lender’s criteria before you apply. This means checking your personal and business reports for mistakes and getting your paperwork in order – boat details, bank statements, tax returns, cash flow forecast, balance sheet, etc.

      • The real cost of owning a boat

      As well as the loan repayments, you will also need to pay mooring fees, dry-dock costs, winterizing costs, maintenance and repair costs, insurance premiums and licensing fees. These additional expenses can add up quickly. Can your cash flow handle the extra load?

      • Do you need a marine survey?

      If you’re buying a used boat, you need to ensure it is safe to go out on the water. A marine survey from an independent inspector will give you a detailed report on the condition of the vessel, it’s engine, and an indication of any repairs that must be carried out. This information can help you when you’re negotiating the boat’s purchase price. 

      How to apply for a boat loan

      Interest rates and fees for boat financing can vary significantly, so it makes sense to shop around before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of boat loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a boat loan before.

      Get started with Swoop

      No matter if you’re seeking your first boat loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality boat financing deals from a choice of lenders. Get yourself a bigger boat. Register with Swoop today.

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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      At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.

      Find out more about Swoop’s editorial principles by reading our editorial policy.

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