If you’ve made the decision to get serious about buying a boat, congratulations! It’s exciting to start looking at manufacturer models, layout configurations, and horsepower options. But if you’re financing your boat purchase, it’s important to educate yourself first about boat loans, extra cost considerations, and your own budget constraints before you jump into the fun of shopping. So if you’re financing the cost of a new (or used) boat, here are the top five things to know about boat loan financing.

1. Choose the Right Loan Type

On average, boat loan terms are 10 to 20 years. While a longer-term loan may mean a smaller payment, keep in mind that you will pay more in interest over the life of a loan. A fixed-rate, fixed-term, simple-interest loan is the most common type of boat loan, where the payment will stay the same for the life of the loan. This may be wiser than opting for a variable interest rate, which could increase during the life of the loan. Down payments are generally 10 to 20 percent of the purchase price, but banks may require a larger down payment for an older boat model. Unlike a house that appreciates in value, a boat will depreciate and could be hard to sell if the economy declines.

2. Know Your Budget

Keep in mind that you will need to finance more than simply the cost of the boat. Loans typically require additional fees including closing costs, taxes, and title fees. All of these expenses should be considered when calculating your monthly payment so discuss these extra fees with your lender. Also remember that beyond the initial purchase price, there are ongoing costs associated with boat ownership that need to be factored in as well. It’s essential to budget carefully so that you have sufficient funds to cover annual insurance premiums, maintenance costs, and marina/docking fees. Your financing budget should include a window of five to 10 percent of the boat cost so you’ll know you can afford to keep the boat, not just buy it. Use a loan calculator to estimate your monthly payment. These free online tools, such as the one at www.BoatUS.com/Boatloans, will help you easily crunch the numbers ahead of time.

3. Check Your Credit

In addition to your debt-to-income ratio, your credit score will directly affect your payment amount as well as the amount that you can finance. Be sure to check ahead of time that your score is correct. Your loan is more likely to be approved the closer your score is to 700, and scores above 800 will give you an even better interest rate. If you’re purchasing the boat with a spouse or another party, be sure to check their credit as well. You can get a free copy of your credit report through www.AnnualCreditReport.com, although you can also get one directly through the bank or institution where you’ll be financing.

4. Get Pre-Approved

Save time by working with your bank or financial institution and get pre-approved for a boat loan before you select a boat to buy. This will help you dial down on your price range and save you time in the long run. It’s also a bonus that once the paperwork is out of the way, you can focus on the fun of shopping for a new boat.

5. Get a Used Boat Surveyed

Used boat purchases require a surveyor. Just as an independent inspection on a home, a secondhand boat purchase also necessitates a marine surveyor to conduct a thorough inspection. Going beyond a cursory glance, a surveyor will evaluate the boat’s systems and equipment to make sure that all is in excellent condition, as well as help you be aware of any safety or maintenance concerns. This can substantially influence the vessel’s pricing, empower you with bargaining leverage, and meet the criteria of lenders and insurers.