There’s just something about boats that screams pure indulgence. Whether it’s peaceful mornings on the water, the thrill of a good catch, or the freedom to explore at your own pace, boating offers a unique escape. Sure, renting is always an option, but if you’re someone who values the freedom to head out whenever the mood strikes, you’ve probably also wondered how to afford a boat of your own. But let’s be serious, boats aren’t exactly cheap & no one wants to break the bank just to relax.
In this article, we’ll talk about how to finance a boat and help you figure out what works best for your lifestyle and budget. Keep on reading so you can stop renting boats and turn to the water whenever you feel like it.
What is a Boat Loan and How Does It Work?
A boat loan is a type of instalment loan that helps individuals buy a boat on finance. Like car loans, for boat loans, you borrow a lump sum of money and repay it over time with interest through fixed monthly payments.
Boat loans can be both secured and unsecured (meaning there can be collateral or not). Loan terms for boat loans range from 2 to 15 years, depending on the lender and the loan amount.
What You Should Know About Boat Financing
Financing a boat isn’t all that different from financing a car. You can choose different boat types for different interest rates & terms depending on your budget.
Here are a few things that will affect your boat loan terms:
- Credit Score: This is a big one. A higher credit score can mean you get better interest rates. If your credit isn’t good, it’s still possible you might get approved, but you might face higher interest rates.
- Type & Condition of the Boat: Lenders often give better terms for new boats or well-maintained used ones. The age and value of the boat can affect how much you can borrow and what kind of loan you’ll be offered.
- Repayment Term: Shorter loans (like 5 to 10 years) mean higher monthly payments but less interest over time. Longer loans (up to 20 years) come with smaller monthly payments but can end up costing more in the long run. It’s all about what fits your budget.
If you are a first-time buyer, then you need to keep in mind a few important things. First is the down payment for the boat. You will have to dig into your savings for a down payment before you can get your hands on your dream boat.
The good news? With the right financing and by understanding how to get approved for a boat loan, owning a boat can be surprisingly doable, and you won’t have to keep renting or waiting for the perfect weekend to find one available.
Boat Financing Terms For New & Used Boats
New Boat Loans Financing Terms
Now, let’s talk about interest rates if you are looking to buy a brand-new boat. In this case, especially in Canada, interest rates can vary quite a bit depending on both the state of the economy and your personal finances. If you’ve got a good credit score, you’ll likely get interest rates around 5% APR.
On the flip side, if your credit score isn’t great, interest rates can go way up, sometimes as high as 24.99%. This can really drive up the total cost of your boat over time. Make sure to do your research and understand what rate you qualify for before you start the process for financing a boat.
Used Boat Loans Financing Terms
Financing a used boat comes with its own set of terms, which can differ depending on the size of the loan and the lender you go with. In most cases, you’re looking at repayment terms between 15 and 20 years for a down payment of 10% to 30%. As with most boat loans, the vessel (boat) usually acts as collateral. That means if you stop making payments, the lender can take the boat back to recover their losses.
Boat Financing Options You Can Choose From
Now that you understand how boat loans work, the next step is figuring out which financing option makes the most sense for you. From bank loans to dealer financing, there are a few different paths you can take, each with its own pros and cons.
Just like buying a car, there are different loan types depending on whether you’re going for something brand new or opting for a used vessel.
New Boat Loans
If you’re eyeing a brand new boat, you will have access to better loan terms such as lower interest rates, longer repayment periods, and the ability to borrow larger amounts. That can open the door to better quality boats that might cost more upfront but save you on maintenance later.
Lenders feel more confident about newer boats, which makes it easier to get approved.
Used Boat Loans
Going the used route? Totally understandable, as used boats can offer major savings. Just know that the loans often come with higher interest rates and might require a bit more paperwork.
Still, used boat loans can be a great way to get on the water without overspending. Just be sure to shop around, compare rates from different lenders, and get a full inspection of the boat before committing.
Different Types of Boat Financing
Secured Boat Loans
When you’re looking to finance a boat, there are two main types of secured loans you need to know about. The first is a secured boat loan through a dealer which has financing relationships with boat manufacturers or marine lenders. When you get a secured boat loan through the dealer means that the boat will be used as collateral. In simple terms, if you fail to go through with the monthly payments of the loan, the dealer can repossess the boat & sell it to recover their losses.
On the other hand, another type of secured boat loan is when you skip the boat dealer and directly head to a bank, credit union or online lender for a loan. This gives you flexibility in the amount you can borrow, but keep in mind, these loans use the boat as collateral too.
Unsecured Personal Loans
An unsecured personal loan is a flexible way to borrow money for a boat. A personal loan can be taken out for just about anything, cars, houses, weddings & even boats. It is also known as unsecured financing.
In an unsecured boat loan, you borrow money from a bank or credit union to pay for the boat and return the money in monthly payments with a fixed interest rate. Unlike a secured loan, there is no collateral, but that means you will have a higher interest rate, especially if you don’t have an excellent credit score.
Marine Brokers
If you don’t have a lot of experience with how boat financing works & are overwhelmed with the options, you can contact a marine lending specialist to help you out. A marine broker is an independent middleman who aims to find the right boat for you from various sellers. They don’t sell boats directly but assist in arranging financing by connecting you with a network of lenders or sellers. They find the best boat that fits your lifestyle and budget.
The process is pretty much similar to personal loans. The biggest upside is that you have someone who knows the ins and outs of the boating business & can make the process easier for you.
Manufacturer Financing & Marine Dealers
Marine dealers or manufacturers, instead of just selling boats directly, also often provide services to help you secure funding by connecting you with banks or other financial institutions. Many dealerships offer in-house or partnered financing options that make the process much more convenient for you by acting as middlemen.
Home Equity Loans
You can get a secured personal loan without using the boat as collateral in a home equity loan or home equity line of credit (HELOC).
If you are unable to qualify for a traditional boat loan, then you can use your home’s equity to get a loan for a boat. A home equity loan is the same as a typical loan, but instead, your house is used as collateral.
Another option is a Home Equity Line of Credit (HELOC) in which you can draw from a credit line whenever you need. You will only have to repay the amount you use, and the payments are flexible depending on how much you borrow.
Is Manufacturer’s Financing Available For Boats?
Most boat manufacturers don’t offer loans directly. Instead, they team up with dealerships and lenders to help you get financing.
However, some do offer direct financing. For example, Yamaha provides boat loans through Yamaha Motor Finance Canada Ltd.
How To Apply For Boat Financing In Canada?
Step 1: Check your credit score
The first thing that can help you decide whether you should apply for boat financing in Canada is to check your credit score. The better your credit score is, the higher your chances of securing a secured boat loan and the lower the interest rate will be. It is ideal to have a credit score between 700 and 800, however, if you have a credit score of 600, you might still be able to get a boat loan. If it is below 600, then you should consider going for an unsecured loan instead, but the interest rate will be high.
Step 2: Calculate Loan Amount
The next step is to calculate the amount you need to borrow using the boat loan calculator. You need to have a boat in mind along with its price to estimate how much the monthly payments will be, the interest rate you will get and how long the loan will last.
Next, before you sign on the dotted line you need to factor in costs of boat ownership, storage, insurance, boat maintenance, registration, safety equipment, life jackets, transport trailer, and fuel for a specific boat as these are key factors that can increase or decrease the overall cost of your boat.
Step 3: Gather Documents
Once you’ve picked out a boat and decided on the type of loan you want, it’s time to get your financial documents ready for the application. Basic documents include recent pay stubs or salary slips, tax returns, letter of employment, credit information and investment or brokerage account statements. You’ll also need to provide proof of address and a valid photo ID.
It’s a good idea to do your homework on the boat you’re buying. Lenders may ask for details about the boat, especially if you’re applying for a secured loan.
Step 4: Find A Lender
Finding the right lender is imperative to applying for a boat loan. You can choose from banks, credit unions, online lenders, marine brokers, boat dealers or manufacturers. Each of these options offers different interest rates, down payment requirements, and loan terms, so make sure to explore them all before you decide.
Step 5: Fill Out The Application
Once you have chosen a lender, you will have to fill out the application online. You can get a loan decision in just a few hours or days, depending on whether you prequalify for the loan. If you are applying for a secured loan, then you need to wait for a marine survey, which determines the boat’s value, before your loan can be approved.
Step 6: Review The Loan Contract
Once your loan is approved, take time to review the loan agreement. Properly go through the important details such as interest rate, loan term, total cost of loan over time, monthly instalment, extra fees and collateral.
What Types Of Boats Can You Finance?
Are you interested in financing a boat to cruise on the open waters, but don’t have much knowledge about which one will be the best fit for you? Read more to learn about the different types of boats you can finance:
- Fishing boat: Fishing boats are made for catching fish and have space for rods, bait, and gear. They are perfect for lakes, rivers, or even offshore fishing.
- Bass boat: Bass boats are small, fast, and built for freshwater fishing. They usually come with swivel chairs, storage for tackle, and powerful motors.
- Jet boat: Jet boats use jet propulsion instead of a propeller, which makes them suitable for shallow waters and offers fast, smooth rides.
- Pontoon boat: Pontoon boats have wide, flat decks with lots of seating. They’re perfect for relaxing, family outings, or small parties on the water.
- Sailboat: Sailboats use wind instead of motors to move. They’re good for calm, quiet trips and come in many sizes for beginners or experienced sailors.
- Catamaran: Catamarans feature two hulls for extra space and balance, making them a popular choice for extended trips, coastal cruising, or even luxury charters.
- Deck boat: Deck boats have open layouts with lots of seating. They’re great for families who want to cruise or do water activities.
- Bow rider: Bowriders have extra seating in the front (the bow), making them ideal for day trips, watersports, and casual boating.
- Runabout: Runabouts are all-purpose boats which are compact yet powerful and work well for cruising, tubing, or just enjoying time on the lake.
Tips to Get the Best Financing Deal for Your Boat in Canada
Consider Operating Costs
When opting for a financing deal for your dream boat, it’s important to consider the operating costs of the boat. You don’t just have to pay for the boat, but keeping it running comes with a cost, too. Maintenance of a vessel can be expensive, especially when it comes to mooring fees, engine servicing, storage, insurance, and fuel costs. You might also need to plan for seasonal costs such as winterisation and off-season storage.
Prepare for a Down Payment
Before financing a boat, you need to ensure you have enough savings for a down payment. The higher the down payment, the lower the interest that you have to pay. It is a good idea to keep the down payment to about 20% of the total cost, but keeping it higher will help you keep more money in your pocket.
Consider Using Collateral
Having collateral isn’t necessary, but it can be helpful to have assets while looking for a boat loan. It can make lenders feel more confident that you will be able to repay your loan since you are able to afford a house or a vehicle. You should be able to provide proof of income, savings, assets or investments. If you don’t have a great credit score, consider using one of your assets as collateral or making a larger down payment to increase the chances of approval and better loan terms.
Improve Your Debt-to-Income Ratio
Other than credit scores, lenders also review your debt-to-income ratio when assessing your boat loan. This helps them understand how much of your current income is going towards paying off other debts. To calculate your debt-to-income ratio, add up all your monthly debt payments, for example, rent or mortgage, car loans, student loans or credit card bills and divide that number by your gross monthly income (pre-tax).
If you have a lower ratio, then lenders will be more willing to approve your loan, as it will show them you have the budget to take out a new loan.
Compare Boat Loans
At last, make sure to compare & evaluate boat loan options before you decide to fill out the application. When comparing boat loans, look at interest rates, loan terms, and down payment requirements.
Check if there are any hidden fees like origination or early repayment charges. Decide between secured (lower rates, more risk) or unsecured loans (higher rates, no collateral). Negotiate and try to prequalify with multiple lenders to compare offers without hurting your credit score.
Tip: Always get multiple quotes from banks, credit unions, online lenders, and marine financing specialists to find the best deal that fits your budget and needs
The Next Step After Buying a Boat: Insurance Survey
Now that you’ve purchased a boat, the next important step is getting it insured. In Canada, most insurance providers require a marine insurance survey before offering coverage, especially if the vessel is pre-owned or over a certain value. This survey helps assess the boat’s condition, safety, and market value, making sure you’re properly protected on the water.
To make the process easier, you can get a professional boat insurance survey from Kiki Marine, which meets the requirements of Canadian insurers and helps you secure the right policy with confidence.
Final Thoughts
Financing a boat doesn’t have to be complicated, but you have to understand your options and plan ahead. In this blog, we have discussed the different ways you can finance a vessel. Explore your boat financing options, such as secured loans, dealership or manufacturer financing, and personal loans.
Don’t forget to factor in operational costs, down payment and make sure you go for the option that is most affordable to you. With preparation and proper evaluation, financing a boat can make it possible for you to finance your own boat.
FAQs
Can you finance a boat with bad credit?
Yes, you can finance a boat with bad credit, but it will be challenging, as you would have to deal with higher interest rates. You might not get a loan from a traditional bank, but you can contact private or alternative lenders for a boat loan. Other factors include the co-signer’s credit score and loan amount.
Can I get guaranteed boat financing?
No, boat financing is not always guaranteed. It depends on several factors, including an individual’s credit score, loan term, lender, boat type & age, type of loan eg, secured vs unsecured loan, and prequalification requirements for the loan.
Should I buy or finance a boat?
Whether you should buy or finance a boat entirely depends on your budget and requirements. If you have the funds to buy a boat outright, you can avoid paying interest and own it free and clear from day one. This means you will be investing in an asset whose value will depreciate over time. However, if you do not have the savings to buy a boat, you can finance a boat and spread out the cost over time.
Can you finance a boat?
Yes, you can finance a boat through several options like dealership financing, personal loans, traditional banks, Home Equity Line of Credit (HELOC), and marine brokers. Approval usually depends on factors like your credit score, type of loan, debt-to-income ratio, and the age and condition of the boat.
What credit score do I need to finance a boat?
You typically need a credit score between 700 and 800 to qualify for a boat loan with good terms. However, if your score is around 600, you may still be able to get approved, though you’ll likely face higher interest rates. Anything lower than that can make it harder to finance a boat, but some lenders may still consider your application if other parts of your financial profile are strong.
What is the actual cost of boat ownership?
The cost of owning a boat includes much more than just the purchase price. You’ll need to budget for ongoing expenses like maintenance (typically around 10% of the boat’s value per year), storage, insurance, fuel, and repairs. Initial costs also include registration, titling fees, and possibly a trailer. Factors like the boat’s size, how often you use it, your location, and financing terms will affect your total cost.