Sailing on your own boat is an invaluable experience. But unless you’ve saved a lot of money, you’ll need a loan to make your dreams come true. Here’s what you need to know about personal loans for boat purchases, where to find boat loans, how to determine costs and what to consider before applying for financing.
What is a boat loan?
A boat loan is very similar to a automatic loan. Most lenders will ask the borrower to complete a loan application, which can be quite complete. Lenders will also likely ask for information such as tax returns and proof of assets. Don’t be surprised if the lender asks to see a detailed account of your personal finances – they want to make sure they’re giving a loan to someone who can pay it back.
The application process is generally quick and approval is largely based on your credit score and your ability to repay. Although banks typically require 10-20% down payment for the purchase of a boat, you may be able to finance 100% of the cost.
How boat loans work
Banks and other lenders have tailored their products to almost any budget and lifestyle. However, there are generally two main categories of loans: secure and unsecured.
Both of these options for financing a boat with a loan have pros and cons, and some borrowers are only eligible for secured loans. The loans and rates available to you will depend on the lending institution and your financial history.
It is important to understand the difference between the two types of loans before taking out financing.
Guaranteed boat loans
A secured loan means that the money lent is backed by collateral – something of value that can be used to recoup the cost of the loan if the borrower does not make the payments. Houses, vehicles and other valuables are commonly used as collateral. The new boat itself could also be considered as collateral for a secured boat loan.
Secured loans offer borrowers two main advantages. They usually carry lower interest rates than unsecured loans because the lender takes less risk because of the collateral. Secured loans are also available to borrowers who may not have the best credit history. Even those with bad credit might be eligible for secured loans after doing some research on the lenders available in the area.
Unsecured boat loans
An unsecured loan does not require collateral, but that does not mean that it comes without conditions. Unsecured loans generally have higher interest rates and more restrictions than secured loans. The application process is also more difficult for unsecured loans.
Many people decide to go the personal loan route when considering boat financing options. Personal loans are unsecured loans that can offer better rates than traditional sources of finance.
Finance your boat with a personal loan
Personal loans generally have very competitive interest rates and flexible repayment terms. If you have a good credit rating and sufficient income, a personal loan may be perfect for you. You can also make additional payments that go 100% towards principal or prepay the entire loan.
A personal loan is not guaranteed, which means that your boat or other property will not be used as collateral. An unsecured loan is entirely based on your creditworthiness and your verifiable income.
Once your loan application is approved and funded, you receive the full amount in your bank account. You can then negotiate with the boat dealer or an individual such as a cash buyer.
What to consider before getting a boat loan
While there are a few choices of budget boats, most of them cost in the thousands of dollars, and anyone looking for a luxury boat can expect the price to be much higher than this. that most families have available for leisure expenses.
Once you’ve set your sights on the boat of your dreams and are ready to consider financing the purchase, take a moment to consider all of the factors that could affect your final decision.
Remember that the price is only one of the expenses of owning a boat. Maintenance and insurance can quickly become expensive items. And if you plan on keeping the boat in a marina, expect to pay monthly rent for a storage area, as well as an administrative fee.
Anyone preparing to take out a loan should also take an honest look at their personal finances and future income. Once the contract is signed, the money must be refunded. Make sure you take a close look at the fine print.
Where to get a boat loan
You can get loans for the purchase of boats from banks, credit unions, online lenders, and other lending institutions. Asking your personal bank for financing options is a good place to start. Having a positive, pre-established relationship with a bank can go a long way in getting you approved with a good rate.
Many boat dealers now offer their own financing options. However, this is not always the case, and any financing available from a boat dealer should be compared to the rates offered by other lenders.
Finding lenders in the online market can be another cost effective method of financing a boat. When other loan companies cannot provide the right option, an online lender could be the ticket to cruise the lake in a new family boat.
The bottom line
While going out into the open water has been a long-standing goal, there are many boat loan financing options available. Depending on your credit and income, you can find secured or unsecured boat loans that meet your needs and budget.
Before you get started, be aware that most financial experts don’t recommend personal loans for discretionary purposes, especially if you already have a credit card or other debt. If you take out a personal loan or a boat loan, have a plan to pay it off. Use our boat loan calculator to see how much your monthly payments will be.