You know that a boat is a large expenditure. What you may not know is that securing a boat loan is fast and easy when you are prepared. In fact, you might find the whole process moves smoothly, so long as you know what you are doing in advance. Whether you already have a dream boat in mind or are merely shopping around, knowing a thing or two about boat financing goes a long way.
Here is some helpful information for boat buyers, so you can feel more prepared and confident about your purchase.
Boat Loans Are Like Car Loans
Similar to a car loan, a boat loan has a fixed amount and an interest rate. While terms vary, you can find many loans with a repayment term of 15-20 years. Interest rates may also be fixed or variable, depending on the kind of loan you receive. However, that is usually for secured boat loans. If you opt for unsecured boat loans, expect a shorter repayment term—usually 5-7 years.
You Can Get Secured and Unsecured Loans
A secured loan uses your new boat as collateral, meaning that if you don’t pay back the loan and go into default, you lose your boat. An unsecured loan, on the other hand, does not use your boat as collateral. Unsecured loans are not connected to any of your assets, making it a much riskier loan for lenders. Obtaining an unsecured loan may only be possible for those with no debt and a high credit score.
Sometimes It’s Personal
Sometimes you don’t want the most straightforward option, especially when the thought of collateral doesn’t sit right. Personal loans can also be used to buy a boat, and most come at a competitive interest rate. You can also find personal loan providers that offer flexible repayment terms, just like a regular secured or unsecured loan.
You can also pay the entire loan off early by making extra payments—and those go 100 percent towards the principal.
If you decide to go with a personal loan, you can use the money immediately. The money will be transferred to your bank account, and from there you can use that amount to pay for the boat.
Expect to Give a Down Payment
Here is another way a boat loan is like a car loan: You have to pay a down payment. Ranging between 10-20% of the cost, the down payment is what you have to shell out in order to receive the boat. From there, the lender covers the remaining outright cost. This shows your ability to pay for the boat and starts the repayment cycle.
Credit Means A Lot
Yes, your credit score is going to determine just how good of a loan you receive from the lender. If you have poorer credit, your repayment terms, interest rate, and even the amount you receive are going to be less favorable than someone who has a higher credit score. Those with near-perfect credit scores will receive the most money for the lowest interest rate.
That said, there are other factors that go into just how much you receive. For instance, lenders are less willing to give you money for an older model than for a newer one.
Other Things to Consider About Boat Loans
While searching for a boat, you will undoubtedly come across many options. Some boats are going to be more costly than others, especially when they are newer. However, the initial price tag is just one of the many expenses that come with owning a boat. Do not forget to factor in maintenance, insurance, repairs, and the storage cost of keeping your boat at a marina.
All these things add up with time. Regardless of how much money you make, be sure, to be honest with yourself about your earnings and financial standing. Once you sign the contract for the loan and the boat, you are going to have to pay the money back.
Lastly, be sure to look at the fine print of the loan terms. Ask questions about repayment, terms, or things you simply don’t understand. If something isn’t clear, make sure you know before putting your signature on the paperwork.
Let Us Help You Buy a Boat
If you have the goal of journeying on open water, then getting a boat loan is the first step. There are many options available, though most depend on your income and credit score. Develop a plan to pay the loan off quickly, so you don’t have anything holding you back from enjoying your next voyage.