How Does Boat Finance Work in the UK?

Boat finance lets you spread the cost of a boat over an agreed period rather than paying the full purchase price upfront. That sounds simple, but the application, pre-approval and final purchase stages can be unfamiliar if you have never financed a boat before.

Here is what the process normally involves and what to check before signing an agreement.

1. Set your deposit and monthly budget

Begin with two figures: the deposit you can comfortably provide and the monthly payment you can realistically maintain.

Your deposit reduces the amount borrowed. The remaining balance is repaid over the agreed term, with interest. Different combinations of deposit and term can produce very different monthly payments and total costs, so it is useful to test several scenarios.

Do not base affordability on the repayment alone. Include mooring, insurance, maintenance, fuel and a contingency for repairs in your wider budget.

2. Choose a boat or establish a price range

You do not always need to have selected one exact boat before exploring finance. Starting with a monthly budget can help establish the price range that may be realistic.

Once you find a potential boat, the finance provider will need information such as its make, model, year, purchase price, location and supplier. The age, condition and value of the boat can influence whether it is acceptable as security and which terms may be available.

3. Complete an affordability and credit assessment

Regulated lenders must assess creditworthiness before entering into a consumer credit agreement. The FCA says this assessment needs to consider both the likelihood that repayments will be made and the risk that making them could be unaffordable.

An application may therefore ask for information including:

• Your address and contact details

• Employment status and income

• Regular household spending

• Existing loans and credit commitments

• The deposit and amount you want to borrow

• Details of the boat and supplier

Boats on Finance begins with a soft credit check for pre-approval. This does not affect your credit score. Further checks may be required before final approval, so always read the application information and ask when a full credit search may take place.

4. Receive a pre-approval decision

Pre-approval provides an early indication that the proposed finance could be available based on the information checked so far. It can help you browse and negotiate with a more realistic budget.

It is important to understand what pre-approval does not mean. It is not a guarantee of funding and does not commit you to buying the boat. Final approval will depend on the complete application, satisfactory checks and the selected vessel being acceptable to the lender.

5. View, survey and check the boat

Finance approval should not replace proper checks on the boat itself. Arrange a viewing and, where appropriate, a sea trial and independent marine survey.

The RYA's second-hand boat guidance recommends using a suitable written agreement, making the offer subject to survey or sea trial, checking ownership documents and establishing that the seller can provide clear title.

If the survey identifies problems, you may decide to renegotiate, ask for repairs, choose another boat or leave the purchase, depending on the agreement and circumstances.

6. Review the finance illustration carefully

Before accepting finance, check:

• The cash price and deposit

• The total amount borrowed

• The term and number of repayments

• The interest rate and representative APR

• The monthly repayment

• The total cost of credit

• The total amount payable

• Whether the rate is fixed or variable

• Any fees, early repayment terms or late-payment consequences

• The fact that the boat is being used as security

MoneyHelper recommends comparing the APR, total amount repayable and the consequences of missed or late payments when considering credit.

7. Complete the purchase

Once the finance, survey, ownership documents and purchase terms are satisfactory, the final agreement can be completed and funds released through the agreed process. Do not treat the purchase as complete until the relevant agreements have been signed and all conditions have been met.

Keep copies of the sales agreement, bill of sale, finance documents, survey, insurance policy and any registration or compliance certificates. These records may be important when insuring, maintaining or eventually selling the boat.

Start with the number that works for you

The easiest way to approach boat finance is to begin with a realistic monthly budget, see boats that fit and apply for pre-approval before arranging a viewing. You can explore boats and estimated repayments here, or start a pre-approval application.

Finance is subject to status, affordability and approval. Terms vary according to individual circumstances and the boat being financed. Your boat will provide security for the loan.