So, you have identified and priced the boat you want, as well as the insurance to cover the boat. All that is left now is to purchase the boat.
Financing a boat can be a daunting process at first glance, especially when you are running low on funds, but it does not always have to be this way. There are various other ways to secure financing for your boat without breaking the bank.
A good example is My Financing USA RV and boat loans with offers that will take the stress off your shoulders and give you peace of mind.
This article not only covers where and how to secure a loan, but also outlines the benefits and downsides of each financing option. Here are the loan options worth considering:
- Boat Loan
Boat dealers arrange boat loans as frequently as every day, which is why they are a popular choice among people seeking to finance their boat.
These boat dealers are people experienced in the entire transactional process and people who have built relationships with other lenders. You can rest assured that the transaction will happen as fast and seamless as possible.
Boat loans are secured loans, which means that your boat will be secured as collateral before you can get the loan. So, if you default on the loan, you could lose your boat in the process.
One major benefit of secured loans is that their interest rates are comparatively cheaper than that of unsecured loans. However, you should know that the interest rate may vary depending on the state, quality, and value of the boat.
- Home Equity Loan
Buyers who have a lot of equity in their homes find it more beneficial to use their home as collateral to finance their boat purchase. The benefit that comes with this option is that you may be able to borrow as much as 85% of the amount of equity in your home.
While you may get lower interest rates with this option, lenders can charge expensive closing costs and other compulsory fees.
The biggest downside of this option is that failure to pay up the loan would inevitably result in the loss of your home.
- Unsecured Loan
Unlike the boat loan and home equity loan, which are both secured loans, applying for an unsecured loan does not require any collateral.
Fortunately, many lenders offer unsecured loans, making it easier to compare different interest rates before deciding which one is the most preferable option.
Since no collateral is required, the lender cannot reclaim your boat if you default on the loan. However, defaulting on the loan can hurt your credit reports for years.
This can make it difficult for you to get approved for other financial products. It may also lead to higher interest rates on your credit cards and future loans.
Useful Tips For Securing A Boat Loan
- Get Pre-Qualified
Ask your boat dealer or lender if you can apply for pre-qualification or at least start the underwriting process before getting a signed sales agreement. This will probably save you some time.
Apply for prequalification from multiple lenders so that you can discover competitive deals.
- Find The Right Loan Type
A fixed-rate, fixed-term, simple-interest loan is the most common of all loan types. It offers the same monthly payments for the life of the loan. On the other hand, a variable rate option may offer a combination of a fixed rate for a few years, then a variable rate.
You should note that a rise in interest rates usually increases the appeal of the variable rate.
- Check Your Credit Rating
A credit rating of 800 and above is considered to be excellent, increasing your likelihood of getting a loan. A rating between 650 and 800 is generally considered to be good. The real problem arises when you have a credit rating that is lower than 600.
While you may still get the loan you seek, the process involved may take more time and involve more paperwork, adding to the complexity of the transactional process.
- Ask The Right Questions
Taking this step will help you to avoid making expensive mistakes now or in the future. Confirm that the monthly payment suits your budget. Besides, find out the real cost of boat ownership early enough.
Remember that buying the boat is just the first step. It will attract different expenses such as insurance, fuel, maintenance, and license over time. It is best to steer clear of loans that come with penalties if you pay before the term ends.