Originally Posted On: https://www.iquanti.com/

With the average price of a new boat costing between $60,000 to $75,000, most consumers will need the help of financing to make a purchase. Thankfully, the marine industry is full of lenders who are ready and willing to offer boat loans to those who need them.

However, not all of these lenders will have the same terms. Most notably, buyers will notice a wide range of interest rates depending on a variety of factors.

This post will explore how the interest rates of boat loans are determined and what factors can influence them.

What is a Typical Boat Loan Interest Rate?

Creditworthy applicants can expect to be offered a boat loan with a starting interest rate in the 5% to 6% APR range. As a general rule of thumb, most lenders will set their best rate at 1% to 2% above the prime rate. Therefore, when the Federal Reserve raises or lowers interest rates, it will directly impact the rates for boat loans.

Factors that Affect Interest Rate

Of course, just like auto loans and mortgages, not everyone will always qualify for the best interest rates available. It’s entirely possible that you might get an offer with an interest rate in the teens, twenties, or potentially even higher.

To maximize your chances of getting the best interest rate, consider the lender’s criteria to make their offer. Here are a few important factors that will impact your APR.

Credit Score

Like it or not, your credit score is how lenders judge whether you’ll be a good candidate for your payments. Although you can get loans with Fair or Good credit, the best interest rates will be reserved for those with excellent credit (FICO Score of 720+).

Length of the Loan

Boat loans can last anywhere from 5 to 20 years. Typically, the shorter the loan, the lower the interest rate since the lender will be paid back quicker. Even though a longer loan will mean a lower monthly payment, borrowers should also note that it will mean more overall interest paid to the lender over the life of the loan.

Loan Size

Even though some lenders may have lower interest rates than others, they might also have a minimum finance amount. For instance, if your budget is $30,000, but the lender requires a minimum loan of $50,000, then they won’t even be an option.

Down Payment Size

Lenders rarely ever want to finance one hundred percent of a purchase, and a down payment is viewed as a way the buyer puts some skin in the game. Typically, the more a buyer is willing to put down, the better the interest rate the lender will offer. Target a down payment of at least 20 percent or more for the best rates.

New vs. Used

Buying a new boat versus a used one will make a difference in your interest rate. New boats typically get better interest rates because they will make more substantial collateral. You can certainly get a boat loan for a used watercraft, but it may come with a higher interest rate.

The Bottom Line

The interest rate of a typical boat loan is not one size fits all. Your interest rates will be affected by several factors, including your credit score, the length of the loan, down payment size, and whether the boat is new or used. It’s also important to keep your budget in mind and shop around for the best rates that align with your financial situation.

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