Is it the first time you’re going to purchase a boat? If so, you might be relieved of how similar the process of purchasing a boat is to purchasing a home or a car.
To begin the process, finding the best loan to finance it is essential. There are a lot of banks and alternative lenders out there in the market that might be able to give you a loan that is less of a hassle and definitely not costly.
There are many options for boat loans, and each of them has its own pros and cons. However, if you are still unsure of your options, you can ask a professional to help with your financing options. To have an understanding of how boat loans work, you need to learn their basics. Here are some of them.
The first thing you should know about boat loans is that it is not exclusive to banks. There are a lot of alternative lenders you can find on the internet. Moreover, you can find them in credit unions and financial service companies. To get the best deal that perfectly fits your financial situation, make sure to research your options.
However, one thing to remember is to make sure that the National Marine Lenders Association is an integral part of their business. Choosing a bank or a lender that has a connection to them comes with being trustworthy and knowledgeable about the industry.
Every lender has its own boat loan rates, and choosing a loan that has an interest rate in fit to your liking is important. Make sure that when you are comparing boat loan rates, they can be applied to the boat you want to buy.
For instance, boat loans with My Financing USA offer loan packages for different boats with competitive rates that aren’t available to other lenders. Hence, you need to canvass and broaden your options to get the best deal.Thi s is important because each loan has its own borrowing limit, and the price of the boat might be too high for the limit.
Once you decide which lender and type of boat loan you want to have, you can go for a pre-approved loan. It is a process where you and the lender talk about the kind of boat you want and its price.
This takes a lot of paper and admin work but isn’t much of a hassle compared to the primary process of the loan itself. However, if you got pre-approved, that means the boat and its price are settled, which takes a lot of time in the application process.
Once you get the pre-approval done, the application begins. Remember to prepare the needed documents before you make the application. During this time, you will be asked about some information, such as your proof of income, assets, and liabilities. After the application process, you would have to wait for a week or so to get the approval. However, this depends on the lender.
Moreover, you will be asked to pay a downpayment. Ensure that you have read the terms and agreements your lender offers and ask questions, such as if it’s refundable if you cancel or default, or if they have a grace period before the boat is forfeited.
That said, here are your loan options to get the very boat of your dreams:
Secured loans are probably the most accessible for boat loans. This type of loan works by having the boat itself as collateral. It may be risky as you can lose the boat you bought, but the loan has longer repayment terms and a lower interest rate than unsecured loans.
Secured loans are the optimal choice for borrowers who don’t qualify for an unsecured loan because of their poor credit score. That said, if you want a higher borrowing limit while having a low-interest rate at the same time, secured loans are for you.
Unlike a secured loan, unsecured loans don’t use the boat or any other personal assets as collateral. Since unsecured loans don’t have any collateral requirement, they are commonly viewed as riskier than secured loans. Since they are riskier, they tend to give higher interest rates and a lower borrowing limit.
However, unsecured loans are more flexible in terms of usage. For example, unsecured loans can be used as payment for upgrades on a preexisting boat.
Dealer Financed Loan
If you are purchasing a boat from a local lender, chances are they offer boat loans you can take advantage of. Usually, these loans come with favorable terms, like longer repayment terms and higher borrowing limits (which depends on the boat you want to purchase).
Home Equity Loan
If you own a house several years already, you can check for your equity. With this, you can apply for a second mortgage or home equity loan. You can use this loan to finance the payment of your new boat. You can also get a new line for credit for the equity, which can also be used for a boat purchase.
There are also several benefits to taking out one. One example of this is that you can get a home equity loan with a low-interest rate and extended repayment terms. Also, they are tax-deductible, saving you more money.
However, you need to appraise your house first, which you have to pay yourself. This is kind of a considerable risk since if you default on the loan, you can lose your house in the process.
Places to Apply for a Loan
If you’ve decided on what loan to get, finding a place where you can get the loan is the next step. Here are some of the places you can apply for a boat loan.
There are a lot of banks in the US that you can get a loan boat from. However, the US Bank is where you can get a decent deal. This bank has secured a loan that allows you to buy either brand new boats or old ones. They also offer low-interest rates.
There are a lot of credit unions you can find on the internet. Credit unions are nonprofit organizations that will allow you to get a loan even with a poor credit score. They also offer loans for major purchases such as car loans, new homes, and boat loans.
Marine Lending Specialists
Marine Lending Specialists are your typical brokers, but this time, for a boat. They can help you secure funding, which they find from a bank or a lender online. Also, most of them have a similar interest rate and repayment terms. They typically have a downpayment of 10-20% of the total price of the boat you will buy.
There are a lot of loan options for you to choose to finance a new boat. However, each of them fits a specific situation, so researching them beforehand is essential. Moreover, there are a lot of lenders that you can choose from to get these loans. Ultimately, the best loan that you should choose is one that fits your financial situation the best.
Lauren Cordell is a freelance writer who specializes in financing and the stock market. She had already contributed to various financial sites and magazines. When she’s not busy making ends meet, Lauren spends her time playing board games like monopoly and chess.