A Guide to Boat Financing Options

June 11, 2019 · 5 minute read

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A Guide to Boat Financing Options

Can you imagine spending every summer weekend on the open water? It’s hard not to love the image of yourself setting sail with your seafaring gear and a captain’s hat. Throw in a bottle of wine, a picnic lunch, and maybe some dramamine—hey, better safe than sorry—and you’re all set.

Let’s face it: Owning a boat is pretty much the dream. If you’re a boat owner, you have readymade plans for every birthday and celebratory event in the foreseeable future. Fiftieth anniversary? Champagne and a boat ride around the harbor. Father’s Day? Champagne and a boat ride around the harbor. Retirement celebration? Well, you see where this is going, right?

Of course, financing a boat might not be quite as dreamy. There’s a reason it’s an aspirational purchase, after all—the upkeep on a boat is by no means cheap. That being said, there are practical ways to finance a boat, whether by taking out a loan from your preferred lender, or working with the boat dealership to secure a loan. And, of course, you could also save up for a boat, whether that means saving to put a down payment on a boat, or buying a boat outright in cash. We’ll discuss some of those options below.

How to Finance a New Boat

Boat Dealer Financing

Like car dealerships, many boat dealerships offer financing on the boats that they sell. You work directly with the dealer to obtain a loan for your new boat and the dealer handles the behind-the-scenes work to connect you with one of their dealership lenders.

If you opt for this funding method, your boat dealer essentially acts as a middle man, such that you don’t have to find boat financing options on your own. This could make the entire process easier on you, and could potentially even speed up the purchasing process.

Furthermore, dealers sometimes throw in extras or accessories, such as extra anchors, grills, fishing rods, or a marine radio when you use the financing they’ve secured for you. These extras are not guaranteed, but it might be worth an ask! Plus, this could be a good option for those who don’t want to deal with a lot of the financing legwork (which is perfectly understandable).

However, even if you’re almost sure you want to finance your boat through a lender, it’s still a good idea to do your own research to make sure this method delivers the best rate for you.

Bank Loans

Some banks, lenders, or credit unions might also offer boat financing. Like dealer financing, banks and credit unions will look at the amount of money you plan to put as a down payment, as well as your credit score, to determine your rates and repayment terms.

When it comes to vehicular loans, financial institutions may have different qualifications and interest rates. It may be worth it to talk to a financial planner or a lender you’ve previously worked with to determine what financing option might be right for you.

Home Equity Credit

Some buyers find that they aren’t able to secure financing through a boat dealer or a bank, or aren’t happy with the terms they are offered. If neither seems like the financing route that fits your lifestyle, you could instead look into a home equity loan or home equity line of credit. These loans are considered second mortgages secured against your home.

The amount of equity you have to work with will be determined by the lender home valuation and other factors. The lender will value your property in order to determine how much of that available equity can be utilized, since not all the equity available can typically be drawn upon for second mortgages.

A Home Equity Line of Credit can also be used for an upfront lump sum as well, but is typically preferred when the borrower wants the option to draw on the line in the future or if the lump sum can be paid back quickly in order to draw on the line of credit again in the future.

A HELOC is typically a Revolving Line of Credit you can draw on up to the lender approved credit line amount and then pay the credit line back down only to draw on the line once again. You only pay on the outstanding portion of the loan you have utilized, similar to how a credit card works.

A HELOC is typically an adjustable rate tied to the prime rate along with a margin and typically carries yearly and lifetime interest rate caps. Review the HELOC terms carefully and compare things like, how much equity the lender is willing to lend, what is the margin value tied to the Prime Rate on the revolving HELOC, what are the interest rate caps?

Is there an early closure fee tied to the line? Also, some people consider if this 2nd lien will be tax deductible. Consult your tax advisor as the IRS has issued guidelines around this subject.

Saving for Your Boat with SoFi Checking and Savings

If you’ve been coveting the idea of buying a boat for your entire adult life, it might be time to start saving up.

Whether you’re saving to buy a boat outright, for a down payment on a boat, or simply for nautical upkeep costs that will inevitably pop up, you could consider opening an online bank account to start saving.

SoFi Checking and Savings® is an easy way earn, save, and spend money. There are no account fees (subject to change), and as a SoFi Checking and Savings checking and savings account holder, you’ll gain access to exclusive member benefits.

Learn more about how to start saving for that boat with SoFi Checking and Savings.

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