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Financing a boat in Australia
Owning a boat can be a lifestyle game changer. Weekends and holidays on the water. Family time, or (whisper it) fishing with mates time.
Boats are a lot of things, but they are not cheap. Analysis by Money.com.au shows the average amount requested for a boat loan is $48,363. The average increases to $54,996 for brand new boats.
Interest and fees can quickly inflate the cost. But you can minimise this finance ‘swell’ by getting the cheapest boat loan you qualify for.
How does a boat loan work?
Secured boat loan
The boat you buy is the asset that secures the loan. This reduces the risk for lenders so they tend to offer lower interest rates. With a secured personal loan, you can typically borrow a higher amount and opt for a longer loan term. But, if you can’t repay the loan, the lender can claim your boat and sell it to cover the finance costs.
Unsecured boat loan
With an unsecured personal loan, your boat can’t be seized by the lender if you fall behind on your repayments. The trade-off is that you’ll usually pay a higher interest rate and won’t be able to borrow as much. Your loan term options might be shorter but you may use the funds to cover other costs, such as equipment or safety gear.
You can typically borrow up to $100,000 (some lenders offer up to $200,000) with loan terms ranging from 1 to 7 years. There are fixed or variable interest rates available, and you can use the finance to buy a new or used boat. Most lenders allow you to make weekly, fortnightly or monthly repayments.
Cheapest boat finance interest rates
The lowest boat loan interest rates on our database start from 5.76% (comparison rate* 6.55% p.a.). But this is for a borrower with excellent credit and a strong application overall, meaning it may not reflect the rate you’ll actually qualify for.
If your credit score is below average, your rate can be much higher. Your interest rate will also be influenced by your income, employment situation and whether you own property. The age of the boat could also affect your interest rate.
The common factor is: lower risk means a lower interest rate. But there is more to a boat loan than just the rate.
What to look for in a boat loan
Finding the best boat loan deal means comparing a range of lenders. Here’s a summary of the key factors to look at:
Interest rate
Interest will be the biggest cost of your boat loan. And while that ultra-low rate you’ll see advertised might look tempting, it’s not always what you’ll actually get. Lenders love to flaunt their best-case rates, but qualifying for those depends on your credit and financial situation. That’s why it pays to shop around and compare quotes from multiple lenders.
Fees
It’s worth looking at the fees charged by lenders, which is represented by the comparison rate. Be wary of loans with a comparison rate that’s much higher than the interest rate, as the difference will be the fees. Boat loans can come with establishment fees, monthly or annual fees and early termination fees.
Loan term
You can usually choose a loan term between 1 and 7 years, although our data shows that 5 years is the most common. Some lenders may offer terms up to 10 years; however, the longer the term, the more you’ll end up paying in interest. On the flip side, a shorter term means you’ll pay less interest overall, though your repayments will be higher.
Flexibility
Some boat loans give you the flexibility to pay off the loan early and save on interest – especially valuable if there are no early termination fees. You may also have the option to borrow more than 100% of the boat’s value to cover extras like boating equipment.
An important point to note is that many lenders offer the same interest rates for boat loans as they do for car loans. This is because both are typically secured loans, where the asset – whether a car or a boat – is used as security. In fact, lenders often use “car loan” as a catch-all marketing term because it’s familiar to consumers. While they may advertise car loans specifically, the fine print usually reveals that the same loan applies to boats and other vehicles or vessels.
Boat loan cost example
Based on the average boat loan amount requested through our database ($48,363), we’ve crunched the numbers to show what it could cost. Using a 5-year loan term and the average personal loan interest rate of 13.87% p.a., here’s how it breaks down:
- Monthly repayments of $1,122
- A total interest bill of $18,961
- Total cost of the boat finance (loan principal + interest) is $67,324
Now, let’s compare the same boat loan with a lower interest rate…
Loan amount | |
Lower interest rate boat loan (6.50% p.a.) | $48,363 |
Higher interest rate boat loan (13.87% p.a.) | $48,363 |
Monthly repayment | |
Lower interest rate boat loan (6.50% p.a.) | $946 |
Higher interest rate boat loan (13.87% p.a.) | $1,122 (+ $176) |
Total interest paid over loan term | |
Lower interest rate boat loan (6.50% p.a.) | $8,414 |
Higher interest rate boat loan (13.87% p.a.) | $18,961 (+ $10,547) |
Total cost of boat loan | |
Lower interest rate boat loan (6.50% p.a.) | $56,777 |
Higher interest rate boat loan (13.87% p.a.) | $67,324 |
| Lower interest rate boat loan (6.50% p.a.) | Higher interest rate boat loan (13.87% p.a.) | |
|---|---|---|
Loan amount | $48,363 | $48,363 |
Monthly repayment | $946 | $1,122 (+ $176) |
Total interest paid over loan term | $8,414 | $18,961 (+ $10,547) |
Total cost of boat loan | $56,777 | $67,324 |
Boat finance eligibility
To qualify for a boat loan in Australia, you’ll need to be:
- 18 years of age or older; and
- an Australian citizen or permanent resident; and
- employed, with a regular source of income that you can demonstrate.
Before applying for a boat loan, consider the following questions, because your lender most likely will…
- Do you have a regular income?
- Do you own other assets? (i.e. a home or car)
- What’s your employment history like?
- Do you have any dependents?
- What are your regular expenses?
- How long have you been living at your current address? (the longer the better)
- Do you have other loans and debts (e.g. credit cards)
How to apply for a boat loan
Applying for a boat loan is like applying for any personal finance or car loan. Below is a general guide on what to expect:
1
Compare as many lenders as possible
Start by shopping around. Different lenders offer different interest rates, fees and loan features – so don’t settle for the first one you find. Comparing multiple lenders helps you spot the best deals. Look at both bank and non-bank lenders, and check reviews or ratings if available.
2
Calculate the total cost
Once you’ve narrowed down a few options, plug the numbers into our boat loan calculator. This tool will help you figure out the real cost of each loan, not just the repayments, but also the total interest you’ll repay over time. Use it to test different loan terms and amounts to find a repayment plan that fits your budget.
3
Apply for loan pre-approval
When you've found a lender that looks like a good fit, apply for pre-approval. This step gives you a clearer idea of how much you can borrow before you start seriously boat hunting. It also shows sellers you're a serious buyer, which can help during negotiations.
4
Submit supporting documents
To process your pre-approval, the lender will need documents to assess your financial position. Be ready to provide recent payslips, bank statements, proof of employment, ID, and potentially details of any existing debts or liabilities. Having everything organised can speed up the process.
5
Go boat shopping
With pre-approval in hand, you know your budget – now comes the fun part. Start browsing boats within your approved price range. Whether you’re buying from a dealer or a private seller, make sure the vessel is in good condition and meets your needs.
6
Submit boat details to the lender
Once you’ve found the right boat, you’ll need to share the details with your lender. This usually includes the make and model, purchase price and seller information. The lender may also require a valuation or inspection, especially if the boat is used.
7
Loan finalisation and funding
After reviewing the vessel details and completing a final assessment, your lender will approve the loan. In most cases, the funds are transferred directly to the seller rather than to you. Once the paperwork is done and the funds are released, you're ready to hit the water and enjoy your new boat.
Can you use a boat loan for equipment and other expenses?
Boat maintenance
A rule of thumb is that maintenance costs up to 10% of the boat’s value per year.
Safety equipment
You’ll need a personal flotation device for each passenger, flares and other safety equipment.
Boating supplies
You might want a trailer, fishing gear, watersports equipment or other boating supplies to use with your boat.
Other ongoing costs
Including fuel, insurance and mooring costs if you can’t keep the boat parked at your home.
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