Is Financing A Boat A Bad Idea
As a general rule of thumb, you should ensure that any purchase you finance will be paid down faster than it depreciates. If the purchases value decreases at a faster rate than your loan balance, you run the risk of going “upside down” on the loan, or dealing with negative equity.
While this is most often talked about in terms of new cars, its also a concern with watercraft, especially since boats are quickly depreciating assets.
Negative equity can be a serious concern with a high-value investment such as a boat. If the boat were to be stolen, totaled, etc., you would be on the hook for the difference between the remaining loan balance and the insurance companys valuation/payout. Negative equity can also come back to bite you if you ever want to trade in the boat or sell it, as youll wind up owing your lender out-of-pocket in order to finalize the transaction.
Lastly, its important to recognize that financing a purchase will cost you more than the sticker price, no matter how competitive the interest rate you obtain. Between loan processing fees and finance charges, the added expense can be significant.
While financing a boat is not a bad idea in and of itself, its important to strike a balance between your purchase price, down payment amount, and loan repayment terms. This will help maintain a healthy loan-to-value ratio and ensure that you dont pay significantly more for your purchase over time than if youd paid in cash.
Boat Loans Are Changing With The Times
Its not a return to the days of easy money, but financing is readily available and approvals are up
Trends in the marine credit market might not be stellar, but they are encouraging. Credit is available for boat loans, interest rates are at historic lows, loan criteria are easing a little and a few more lenders are getting into the market, financial consultant Jim Coburn says.
If a customer comes in and hes paying his bills and has a down payment, hes going to get a boat loan, says Coburn, a former president of the National Marine Bankers Association who now operates Coburn & Associates LLC in Macomb Township, Mich.
Don Parkhurst, another former NMBA president, agrees. Theres plenty of money available at historic low rates and more people are getting approved today than several years ago, says Parkhurst, senior vice president for marine and RV finance at Sun Trust Bank.
Thats good news for dealers, even if sales projections for 2012 are nothing to write home about. Overall new-boat sales in 2012 will range from flat to modestly improved, Coburn predicts. That modest improvement has been evident in first-half sales and the credit picture has modestly brightened as well.
Loans despite blemishes
Merrick will consider applicants with credit scores as low as 580 Medallion touts its premier rate at 9.95 percent. However, Parkhurst says non-prime rates can jump to 15 to 17 percent, depending on a borrowers qualifications.
Caution and scrutiny
Where To Get A Boat Loan
Online loans
Online lenders typically offer unsecured boat loans only. These lenders may be able to approve and fund loans more quickly than other lenders. Online lenders also offer pre-qualification, which shows you what loan amount and rate you could get without affecting your credit.
Some tailor their loan products to borrowers with good or excellent credit , while others accept lower credit scores and focus more on factors like your monthly cash flow, education and where you work.
Bank loans
Youre more likely to find secured loans from banks. Banks may sometimes offer perks to existing customers, like discounts and favorable loan terms. If your bank offers boat loans, it may be a good place to start.
Navy Federal and First Tech both offer boat loans with 15-year repayment terms with rates starting below 10%.
loans from marine lending specialists
Boat loans from marine lenders have similar rates and repayment terms to personal loans. One advantage might be the ability to work with a specialist who understands the boating business, according to the National Marine Lenders Association.
These loans must be secured by the boat and require down payments from 10% to 20% of the purchase price. A bank may require a down payment or make it optional.
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Best Marine Lending Specialist: Trident Funding
Trident Funding
Why We Chose It: Our choice for the best marine lending specialist is Trident Funding because they offer competitive rates, specialize in custom marine financing, and have been in business since 1996.
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Dont finance boats more than 25 years old
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Dont finance live-aboard vessels
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You usually need a down payment
Trident Funding was founded by boat enthusiasts for boat enthusiasts with the goal of connecting borrowers to lenders so they can finance their passion. It is the U.S.s largest independently owned boat and yacht loan origination company. Trident also finances RVs and provides marine resources and tips on its website.
The company understands the boating business so can help educate you if this is your first boat. It has worked with over 40 banks and lenders so can rate shop to offer the most competitive rates and terms which vary based on the type of vessel, down payment amount, loan type, and borrower qualifications.
They offer fixed and variable rates starting at 4% and both short and long term boat loans up to 25 years. Typically, they approve loans within 48 hours and a down payment of 1020% is standard. They finance new and used boats that are no older than 25 years and only used for recreational purposes.
Trident Funding has positive customer service reviews and a solid industry reputation. Customers raved about the excellent service, timely responses, and marine industry knowledge.
Understand The Costs Of Owning A Boat
Boat loan down payments typically range from 10% to 30%, so make sure you have enough money saved up to cover the cost of the down payment before you apply for a loan. Once you own a boat, youll also have to cover maintenance and related costs. Some of the expenses youll need to cover as a boat owner include:
- Trailer to transport and store your boat: If you dont plan on storing your boat near the water, youll need a trailer to transport it from your home.
- Boat insurance: Boat insurance can protect you in the case of an accident or if anything happens to your boat.
- If you dock your boat at a marina, youll typically have to pay monthly fees for the privilege.
- Registration: Just like a car, many states require boat owners to register their boat. Costs vary widely from state to state.
- Winter storage: If you live in an area where weather conditions arent suitable for boating year-round, youll need to store your boat in the winter.
- Maintenance: Routine maintenance costs include painting, cleaning, and replacing small parts.
- Gas: If your boat is powered by gas, youll need to fill it up regularly.
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Use A Boat Loan Calculator
The LendingTree boat loan calculator helps you determine your monthly payment using the loan amount, interest rate and loan term. Additionally, the calculator breaks down monthly payments by year, helping you plan ahead. Should you find that your estimated payment is a bit tight for your budget, the tool allows you to adjust the loan amount and/or boat loan term to find what best fits your needs. When its time to buy, you may fill out a single LendingTree form and receive up to five possible boat loan offers from lenders based on your creditworthiness.
Boat Loans: Calculate How Much Boat Financing Could Cost You
Boat loans are available from a variety of lenders, including banks, credit unions, and online lenders.
Kat TretinaUpdated March 8, 2021
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
Whether you love sailing, offshore fishing, or other water activities, you might consider buying a boat. However, boats can be expensive: Smaller vessels start at $10,000, while offshore fishing boats might cost $400,000 or more.
If you need to cover the cost of a boat or would like to refinance a boat you already own, a boat loan might be a good choice. Just keep in mind that youll likely need good credit and verifiable income to qualify.
Heres what you should know about boat loans:
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Factors To Consider Before Living Aboard
Before moving onboard your boat, you should ask yourself some questions:
- Is this just for a period of time before you go cruising or is this a lifestyle choice?
- Are you comfortable with repeatedly defending your choice to your friends and family?
- Are you living in a climate that is boat-friendly year-round?
- Are you handy and a good problem solver?
- Who will accept your Amazon deliveries and are you ready to grocery shop frequently since there wont be room to stow much?
- Are you ready to become your own maid?
- Will you feel comfortable with your kids being in this new environment?
- Whats Plan B if it doesnt work?
After moving aboard, you may be hauling the laundry to the laundromat or groceries from the parking lot with no dock cart nearby. Youll need to go to the pump-out station regularly as well as to the post office for your mail. Small doesnt translate to easy so mentally run through a typical week and write down solutions to the issues.
Customized Boat And Yacht Financing
As the masters of boat financing for the past two decades, weve perfected the art of providing loans for marine purchases big and small.
We finance any type of watercraft imaginable at virtually any price point. Whether its financing for a used boat loan or getting the best terms on a high-end yacht, our specialists are trained to deliver the top finance options for virtually any type of watercraft, ranging from $15,000 to $4,000,000.
All it takes to get started is clicking the Apply Now button here and we can get you a credit decision within 24 hours .
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The Bottom Line On Boat Loan Terms
If youre financing the purchase of a boat, keep in mind that your options vary along with your financial picture. As with any other loan, those who come bearing good credit and a decent chunk of disposable income will find more favorable boat loan terms than those with less-than-perfect credit and a tighter budget. In general, financing a luxury item like a boat may be subject to higher underwriting standards than a car or home.
A few things to be aware of:
- Simply getting approved for a loan and being able to make a down payment does not necessarily mean that you will be able to keep up with the obligation long term. Make sure you consult your budget and be realistic.
- When shopping for a loan, be sure to check your credit, pay down other debt and get prequalified so that you know the exact amount for which youll get approved.
- Dont get in over your head. Its tempting to buy a boat, but the better option is to make sure that you can afford the payments before giving into that temptation.
Down Payment May Be Required
Boat loan lenders often want to see a down payment, generally between 10% and 20%, depending on factors including the lender and the cost of the boat. Some lenders offer 0%-down loans but keep in mind that making a down payment can hedge against the boats depreciation, or loss of value over time, and help prevent a situation where you owe more on your boat loan than the boat is worth. A down payment may also lower your monthly payment and reduce the total amount of interest you pay on the boat loan.
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Ready To Secure Boat Financing
The bottom line? If youre buying a new boatwhich wed certainly encourage as opposed to buying used, since new boat-buyers report a much higher level of satisfactionand your credit score and debt-to-income ratio are up to snuff, you should have no problem financing a boat that meets a lenders minimum loan amounts for up to 20 years.
Use our Boat Buyers Guide to help work through all the other factors that should be taken into account when making a purchase of this nature, and youll have years of fun on the water to look forward to.
Fallen In Love With A Boat Compared With Auto Loans Financing A Boat Can Be A Much Heftier Investment
Boats can be more expensive than a car, which means loan amounts can be higher and terms can be much longer.
Just how much you pay to finance a boat depends on a number of factors, including the type of boat loan you choose, the loan terms, your down payment and your credit.
Lets take a look at the different types of boat loans, your financing options and how to apply for a boat loan.
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How Much Can I Afford
Use a boat payment calculator to see what your monthly payments might look like and make sure youre aiming for a payment that is comfortable for you. Keep in mind that the payments are only part of the ownership costs: You may need to pay for docking, storage, maintenance, fuel, licensing, boating lessons, a towing vehicle, a towing trailer and safety equipment.
What Are The Benefits Of A 20
The main advantages of a 20-year fixed mortgage versus other mortgage options are:
- Stability Youll be able to lock in the interest rate on your mortgage for the entire 20-year term. This gives you a degree of predictability you wont have with an adjustable-rate mortgage .
- Lower interest rate Interest rates on 20-year loans are usually lower than on 30-year loans.
- Less time before you own your home Compared to the more common 30-year loan, youll shave 10 years off the time it takes to pay off your mortgage and own your home outright.
- Lower total cost of borrowing Between a lower interest rate and a shorter term, you’ll reduce the total interest you pay over the life of the loan.
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How To Get A Boat Loan
Whether you’re buying a house, a car or a boat, lenders look for stability and consistency in your employment history, income, and assets.
How Do Boat Loans Work
Boat loans function similarly to auto loans or mortgage loans that you may have gotten before. Here’s how the process works:
- Find the boat before you start looking for financing. Many lenders ask for information about the boat in the financing application, so you’ll need to know exactly what you want to buy.
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You’ll need to have good credit. Most of the lenders we looked at for this roundup required a credit score of 700 or above.
- You may be asked for a marine survey. You may be asked to have a marine survey completed to ensure the boat is in proper functioning order during your purchase process. According to the National Marine Manufacturers Association, the typical marine survey will cost between $20 and $25 per foot. This is most commonly required for people buying a used boat.
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Expect to make a down payment. Like with a home or a car loan, you’ll likely need to make a down payment for your boat loan. The percentage requirement varies by lender and the amount you’re financing, but it’s generally between 10% and 20%.
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Living On A Boat: Beginner’s Guide For Liveaboards
Its easy to romanticize the idea of living on a boat full-time however, it’s an alternative lifestyle like that takes preparation, organization and an ability to roll with changes. When you commit to moving aboard, make checklists of necessities and talk to your partner about deal-breakers. Prepare the boat for life aboard well before you make the move.
Boat Loan Terms: How Long Can You Finance A Boat
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Buying a boat? Before you gather your gear and take to the high seas, youll likely need to figure out how to afford your purchase. One of your key questions may be: How long can you finance a boat? Boat loan terms, unlike car loan terms, can stretch up to 20 years, nearly as long as a home mortgage. Whether you should borrow for that amount of time depends on several factors, including the cost of the boat, which can range from a new jon boat under $5,000 to million-dollar yachts. In general, the lowest interest rates are for the shortest loans, but your monthly payments would be higher.
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