That hard part about financing boats is that they can easily be priced at tens of thousands of dollars- even over a few hundred thousand dollars. This usually means that boats are only afforded by the wealthy or the lucky. However, obtaining a loan specifically for the purpose of purchasing a boat, commonly known as a boat loan, can help even middle class individuals afford high class boats.

The advantage of boat loans over other types of personal loans is that they are very generous with APR, or annual percentage rate. This rate is essentially the extra money that is to be paid back to the lender with each payment. Obviously, the lower the APR, the better off the borrower is financially. Boat loans often go for extremely high amounts of money- and regular personal loans would likely have enormous interest rates. Unlike personal loans, boat loans still keep the rates competitive, despite the high loan value.

Part of the reason that boat loans can be offered at such low rates is that lenders know the money will be used for a specific reason- buying a boat. When less risk is involved with the lender, the better the APR will be. This hold true with boats, since full coverage insurance must be obtained. In the event that the boat is damaged or destroyed, the lender may still be able to reclaim lost funds. In the event that the borrower can’t pay the boat off, the lender simply has to resell the boat.

Of course, there are several downsides in obtaining a boat loan. Most boat loans have a very high minimum amount of money to be loaned- which can make buying cheaper boats rather inefficient. Full coverage insurance on boats can also be very expensive, which will run up a large bill each insurance pay period. The rate in which the borrower pays back the money is negotiable, but it can easily exceed 10 years. To many, the thought of being in debt for 10 years is incredibly stressful.

Lastly, boat loans can often be hard to find a secured loan for higher priced boats, so either a cheaper boat must be settled for, or an unsecured loan must be obtained. Either way, the borrower has to settle for a lesser boat, or pay more in the long run from higher interest rates that unsecured loans carry. While this is inconvenient, it often can’t be avoided unless an expensive item can be used for collateral.

Boat loans were designed to make boats affordable to the masses- not just the wealthy. In this respect, they do accomplish this. It obviously comes at a price, however, since borrowers will likely be in debt to lenders for many years- often 10 years or more. If boating is a passion in life, this fact really isn’t too disturbing. Boat hobbyists usually see no problem in the debt, as long as a steady income is maintained and the full coverage insurance can be paid- as this will inevitably lead to a fully owned boat in just a few years to a decade.