How a boat loan is calculated
Financing a boat works like any other fixed-rate installment loan. You subtract your down payment from the purchase price to get the amount financed, and that balance is repaid in equal monthly instalments over the term you choose.
Each payment covers the interest due on the remaining balance first, and whatever is left reduces the principal. Early on, more of the payment goes to interest; as the balance shrinks, more goes to principal. The monthly figure shown here stays constant for the life of the loan.
Reading the numbers
The monthly payment is what you owe the lender each month. The total interest is the extra you pay on top of the amount financed, and the total cost is the financed balance plus all that interest. The donut chart splits your total payments into the part that repays the boat and the part that is pure interest.
A longer term lowers the monthly payment but raises the total interest, because the balance is outstanding for longer. A shorter term does the opposite.
Tips before you sign
A few habits keep the cost of a boat loan down:
- Boat loans often carry higher rates and longer terms than car loans, so shop several lenders and compare the APR, not just the monthly payment.
- A larger down payment cuts both the payment and the lifetime interest, and helps you avoid owing more than the boat is worth.
- Budget for the real cost of ownership too — insurance, storage, fuel, winterising and maintenance can rival the loan payment itself.
What this estimate covers
The result is principal and interest only. Sales tax, registration, dealer fees, insurance and any extended warranty are not included and should be budgeted separately. Your actual rate and terms depend on the lender, the boat and your credit.
Formula
loan = principal − downPayment; r = annualRate/100/12; payment = loan·r / (1 − (1+r)⁻ⁿ)Frequently asked questions
- How does a bigger down payment help?
- A larger down payment lowers the amount you finance, which reduces both the monthly payment and the total interest you pay.