Fallen in love with a boat? Compared with auto loans, financing a boat can be a much heftier investment.
Since boats can be more expensive than cars, loans for them may have larger maximum amounts and longer terms.
The amount you pay to finance a boat is determined by a number of variables, such as your credit score, down payment, loan terms, and kind of boat loan that you select.
Let’s examine the various kinds of boat loans, your financing alternatives, and the boat loan application process.
Types of boat loans
There are financing options for both new and used boats, including secured and unsecured loans. Each type of loan has benefits and drawbacks.
A secured personal loan is backed by collateral. The collateral may be taken by the lender as payment if you don’t repay the loan.
The lender may seize your vehicle in many states if you default on your loan. Similar to this, if you default on a secured boat loan, the lender may be able to reclaim the boat since it serves as collateral.
Nothing, not even the boat, is used as collateral for an unsecured personal loan. Lenders see unsecured loans as riskier than secured loans because they aren’t tied to a particular asset, so they usually have higher interest rates. However, compared to a secured boat loan, you may have more options for how you use an unsecured boat loan.
A home equity loan, a kind of second mortgage, can be an alternative if you would rather not get a personal loan. With this kind of loan, the boat loan would be secured by your house. Generally speaking, interest rates on secured loans are lower than those on unsecured loans. However, because the stakes are so high—if you default on the loan, the lender may be able to seize your property—home equity loans can be especially dangerous.
How boat loans work: Typical boat loan terms
If you’ve ever had a car loan, you already know the fundamentals of how a boat loan operate. You can apply for a loan with a repayment term and an amount that does not include a down payment. Depending on how good your credit is, the lender may offer competitive rates if you are approved.
Boat loan repayment terms
Depending on the loan amount and lender, you can typically apply for a secured boat loan with a maximum 20-year loan term. Personal loans classified as unsecured boat loans usually have shorter terms (usually no more than five to seven years). The total interest you pay on the loan will increase with the length of the loan.
Down payment may be required
Boat loan lenders typically require a down payment; this amount typically ranges from 2010 to 2020, depending on a number of factors such as lending institution and boat cost. Some lenders provide 100% down payment loans (200%E2%80%94%), but it’s important to remember that making a down payment can offset the boat’s depreciation (or loss of value over time) and help you avoid getting into a situation where you owe more on the loan than the boat is worth. A down payment can also result in a smaller monthly payment and a lower overall interest rate on your boat loan.
Boat loan interest rates are normally fixed and can change significantly depending on the lender and your credit history. As of April 2020, some lenders are offering annual percentage rates, or APRs, on secured boat loans that range from roughly 7% to almost 10%. Your rate will be influenced by various factors, including the type and year of the boat, credit history, loan term, and loan amount.
Where to get a boat loan
There are several lenders available to you if you want to apply for a boat loan, including boat dealers, credit unions, and banks. Additionally, marine finance companies specialize in these types of loans. The following credit unions and banks provide boat loans:
Truist, formerly SunTrust, offers unsecured marine loans. LightStream, the bank’s online lending branch, offers loans with terms of 24 to 144 months and amounts ranging from $5,000 to $100,000; however, the lender states that its lowest rates require excellent credit.
U. S. Bank offers refinancing and loans up to $150,000 for new or used boats. In order to be eligible for the bank’s best rate, you will need to finance a new boat with a loan amount greater than $25,000 (i.e., no more than 10% of the boat’s E2%80%99 value) and a term of twenty-four eight months or less. Additionally, you must configure automatic payments from a U S. Bank personal checking or savings account.
Bank of the West
Loans for new and used boats and personal watercraft are available from Bank of the West. The minimum loan amount is $10,000.
Navy Federal Credit Union
Loans for personal watercraft and new and used boats are available from Navy Federal Credit Union, with terms of up to 180 months. Members of the armed forces may be eligible for a rate discount with direct deposit. Credit union membership is open to active duty personnel in all branches of the armed forces, as well as their families and household members.
USAA provides loans with maximum 180-month terms for both boat purchases and refinancing. The company also finances jet skis and personal watercraft. You need to be a USAA member in order to apply for a boat loan. Membership may be available to spouses and children of active and retired military personnel.
What to consider before applying for a boat loan
Here are some things to think about before preparing to set sail on your new vessel.
Even though some lenders will give subprime borrowers a boat loan, they might still demand a low debt-to-income ratio and a down payment. Remember that you will likely be offered a higher interest rate if your credit score is lower than that of someone with excellent credit.
The total cost of owning a boat
Don’t forget to account for expenses other than your boat loan payments each month when creating your budget. Slip fees, winterizing, towing, land storage, fuel, boat insurance, repairs, maintenance, registration, and taxes are a few examples of these ongoing costs.
Whether you’ll need a marine survey
The amount you can borrow when applying for a secured boat loan will depend on the value of the boat.
A marine survey is something you should get if you’re not buying a new boat. An inspector will inspect the boat, engine, and trailer during a marine survey. They will also note any necessary repairs, describe the boat’s condition, and decide if it is safe to use on the water.
How to apply for a boat loan
The application process for a boat loan is comparable to that of a personal or vehicle loan. You’ll need to find a lender first. In some cases, you can apply online. If not, you might be able to apply in person at a credit union or bank.
Next, along with employment details and other personal information about your assets and debts, you’ll usually need to provide details like the loan amount, the boat’s age, type, and purchase price. This could lead to a hard credit inquiry to check your credit profile, just like with personal and auto loans (be aware that this could drop your credit scores by a few points).
After that, you’ll have to wait for approval, which, depending on the lender you’re working with, could be available as soon as the following business day or could take a few business days.
Expert boaters take every precaution to be ready when they’re out on the water, so it makes sense to approach boat loans in the same manner. Here are some suggestions to find the financing you want.
- Look around and evaluate offers from several lenders to determine which one best suits your needs financially.
- Apply for your boat loan.
- Review the terms carefully before deciding to sign. If it’s a go, get ready to sail the seas.
After comparing your options, obtaining several quotes, and failing to secure a boat loan, you might want to take some time to improve your credit, pay off debt, and accumulate savings for a down payment. Additionally, to help you avoid rough financial waters down the road, don’t forget to factor ownership costs into your overall boat budget.
FAQ
Is it hard to get a loan for a boat?
Generally speaking, boat loans have higher credit requirements than most personal loans and auto loans. In the event that your score falls outside of the very good to excellent range, it is unlikely that you will be accepted.
What credit score is needed for a boat loan?
Eligibility requirements vary depending on the lender you apply with. A FICO score of 670 or above can increase your chances of getting approved. A lot of lenders prefer it if your monthly debt is no more than 36% of your gross monthly income.
How do most people finance a boat?
Boat loans can be obtained as unsecured loans, which frequently have lower borrowing limits and a higher interest rate, or as secured loans, which need collateral. Online lenders, credit unions, and conventional banks are your options for obtaining a boat loan. Comparing prices can help you find the best deal on this purchase.
What is the average boat loan term?
While boat loan terms can be as short as a few years, they usually range from 10 to 20 years. %20Lending%20may%20change%20from%20one%20lender%20to%20the%20next,%20but%20in%20general,%20the%20following%20is%20what%20you%20can%20expect%20when%20financing%20a%20boat:< %20APR%20range: Prime loan rates may start at 6% to 7% APR for borrowers with excellent credit.
Read More :
https://www.discoverboating.com/buying/boat-loan-basics