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Boat Loans

Finding the Best Boat Loans

    There is nothing like rewarding yourself with long days lounging on your new boat. But before you can start to enjoy the warm air and water, you first have to figure out how to pay for it. Unless you are loaded, you will probably have to take out a boat loan. Finding boat loans may be a little more difficult than getting a mortgage or auto loan because not as many lenders offer them; however, if you shop around you should be able to find many boat loans with good terms.

How Much You Need to Borrow

    Before you start searching for boat loans, you need to know roughly how much money you will need. At first you might think that the answer to that question is easy. You need enough money to buy the boat. However, borrowing enough to pay for just the boat may leave you hurting for more money. Unlike cars or houses, boats have many additional expenses that aren't always put into the price of the boat. Those expenses are for things like sails, safety gear, electronics, etc. (Jessie 23). The prices for those extras can really add up, and if you don't get a loan big enough to cover both the expenses of the boat and the extras, you may end up buying a boat that isn't able to sail (Jessie 23). So make sure you apply for a boat loan that covers all of things you must pay for in order to make your boat operational.

Paying the Boat Loan Down Payments

    Once you know how much money you need to borrow, it is time to learn how to save money. The first way to save money is by putting down a large down payment. Boat loans normally require large down payments anyways, so you shouldn't be surprised when your lender asks you for a bigger down payment than you had to put on your house or car (Jessie 57). Paying as big of a down payment as you can afford is smart because you won't have to pay as much interest.

Choosing the Best Term Length on Boat Loans

    You may be enticed to extend the term length of your boat loan to lower your monthly payment. After all, choosing the longest-term length available could make that dream boat affordable. But don't fall for it. Boat loans with long-term lengths are way more expensive than boat loans with short-term lengths. You want to get the shortest-term length you can possibly afford. It will save you money and keep you from becoming "upside-down."
    Being "upside-down" is when you owe more money on your boat loan than you would make from selling your boat (Pascoe 8). That means that if you were to sell your boat, you would not make enough from the sale to pay off your boat loan. You would actually have to pay more money to the lender after selling your boat. That happens because boats depreciate, which is a fancy way of saying that they lose their value over time. In fact, a new boat loses about 20% of its value the second after it's purchased (Pascoe 7). Because boats lose their value so quickly, you need to pay off your boat loans quickly. If you don't, your boat will lose its value faster than you pay off your boat loan -- which leaves you "upside-down." Therefore, it's smart to get a short-term loan. That way you will pay off your boat loan quicker than your boat loses its value. If you are worried about becoming "upside-down," you should ask the boat dealer how quickly your boat will depreciate. Your dealer will not want to tell you, but you should try to find out (Getchell 10). That way you will know how short of a term length you will need to get.

Prepayment Terms on Boat Loans

    One of the best ways to save money on boat loans is to pay them off early. By prepaying your boat loan, you won't have to pay as much interest. Prepaying your loan is great for you, but bad for the borrower. After all, they make less money. As a result, some borrowers slip prepayment penalties into the loan agreement. Those penalties make you pay a fee if you pay off your loan early. You should never get a boat loan that has a prepayment penalty. When looking at boat loans, make sure to look at each loans prepayment terms. The best type of boat loan to get is one that is a simple interest loan that doesn't have a prepayment penalty (Lamy 147).


Getchell, David R. The Outboard Boater's Handbook. Blacklick, Ohio: McGraw-Hill, Inc., 1994.

Jessie, Diana B. Your New Sailboat. New York: Hearst Books, 2002.

Lamy, Robert J. Boating Magazine's Insider's Guide to Buying a Powerboat. Camden, Maine: International Marine, 2000.

Pascoe, David H. Mid Size Power Boats. Tallahassee: D. H. Pascoe & Company, Inc., 2003.