Financing a boat in Canada can be an easy way to start into boating or upgrade to what you really want. Whether you are paying for a boat with cash (including reserves/investments), or you plan to borrow in one form or another, boats hold their value very well. Because of that, banks with specific boat loan programs will have longer amortization for boat loans (number of years/months you can take to pay it back and the payments are divided out over) than personal loans, or loans for almost all other motorized equipment.
Here are some basic guidelines for boat loans:
All loans are “O.A.C.” (on approved credit -subject to the bank approving your loan and your creditworthiness).
New boats can have amortizations up to 20 Years. You can choose to have it less time, and yet this is typically the maximum if you qualify for it.
Used boats are often able to have amortizations up to 20 years - (minus) the age of the boat. For example, in 2019, a 2016 bowrider would likely have a maximum amortization of 17 years (20-3).
The rate you qualify for depends on your credit score, the age of the boat, the amount you are borrowing, the amount you are putting down in cash (and/or trade), and the current prime lending rate at the time of application at the bank you are applying to.
Applying for a boat loan means that they will, upon your approval, check your credit score and seek a pre-approval on a boat loan. This process is often referred to as a hard credit check. This can cause a very slight and temporary decrease in your credit score. We advise not having multiple credit approvals run at multiple boat dealerships within a short period of time.
Some new and used boat dealerships will have in house financing departments, and some will work with an outside and independent brokerage. Although there are pros and cons to each, the main one is that often a loan broker may have access to slightly better rates due to the overall volume of business and the relationships with multiple lenders/banks.
Boat loans typically have a much better rate than personal loans. They are usually not available to individual customers walking into a branch and are best accessed through a broker or dealership.
Boat loans are almost always “open” and can be paid down partially or fully with no restrictions once the initial hold period of a few months passes.
Boat loans can be processed before or at boat delivery depending on the agreement you have with your boat dealer.
Payments can usually be weekly, bi-weekly, or monthly
The only security for the loan is the boat itself. It does not tie up any of your other assets.
Here are two examples of boat loans available today. The amount, rate, and amortization of the loans are for example only, and there are many options other than these available:
Selling price is $32,000
Downpayment is equal to the taxes of 13% (in Ontario) or $4,160
No trade
Amortization is 20 years, and the interest rate is 5%
Bi-weekly payment is $97.41
Used 2014 large 25’ bowrider with many options.toyloan
Selling price is $54,000
$0 down payment
Trade of a smaller bowrider equals $19,000
Taxes on difference equal $4,550
Loan value is $39,550
Amortization is 15 years, and the interest rate is 5.4%
Bi-weekly payment is $148.07
So, to recap, typical boat loans range from 5 - 20 years. Some other benefits of using a boat loan include not tying up your cash or pulling money out of investments. Also, although as compared to secured lines of credits, the boat loan interest rate is slightly higher often, it is structured to have to have principal and interest payments (blended) over the amortization period. Most credit lines are interest only payments, and can end up costing you far more interest if you don’t pay it down in a disciplined fashion.
Regardless of how you pay for your new or used boat. Getting to the best place in the work (on the water) is ideal. This is just one tool to help get you there.