The idea of owning a boat is one that many individual harbours. One of the ways to achieve that idea is through boat loans. Similar to a car loan but much higher in value, a boat loan is a financial product that lets you own a new or used boat and pay back with interests. The cost of financing a boat will depend on several factors such as the type of boat you’re getting, the type of boat loan, down payment, loan terms, and credit score.
Type of boat loans
Boat loans can usually come in various options which include
- Secured loans: This is a loan secured by collateral and defaulting on the loan gives the lender the power to use the collateral as repayment. Most times, the boat itself is the collateral, and on default, the lender will just repossess it.
- Unsecured loans: This is a loan that has no asset used as collateral. Lenders consider them as more risky than secure loans and charge higher interest rates because of this. An unsecured boat loan may, however, give more options than a secured one.
- Second Mortgage: the top options above are personal loans. There is another option of using a home equity loan. This is what the second mortgage is. This loan uses the home as security for the loan. Thus, it is considered a high-risk loan due to the consequences of defaulting.
Who offers boat loans?
Different lenders provide boat loans with different terms. Banks, boat dealers, credit unions, marine finance companies, etc. provide boat loans.
What to know about boat loan?
Loan Term: When applying for boat loans, the duration is essential. A secured loan will usually have a much longer loan term than an unsecured loan. But, the loan term would still depend on the lender and loan amount. A secured loan could last for as long as twenty years but an unsecured loan last at most seven years. However, the longer the loan term, the more interest you will pay.
Down Payment: A down payment is also a requirement for most boat lenders, and it could vary between 10% – 20%. However, there are lenders who do not request down payment, and while this may seem like a good idea at first, it could mean paying more when you consider the interest.
Interest Rate: Your interest rate may be variable or fixed and vary from lender to lender. It could, however, be influenced by credit profile, the loan amount, and loan term.
How to Apply
The application process for a boat loan is not much different from the process of getting a car loan. You will need to find a lender which could be online or a brick and mortar operation. Ensure that your lender is licensed. Then you have to provide information regarding your financial situation as well as the kind of boat you want and the cost. Once you have done this, it is left to the lender to verify the information you provide and grant approval or otherwise.