Many boat owners are often in need of boat financing. Financing your boat purchase can be as simple or as involved as you make it. There are some basic things you should consider when financing your boat.
Most boat financing options are similar to automobile financing. Lenders generally provide fixed interest rates for up to 15 years. Extended terms and low interest rates are common with boat financing. Some lenders specialize in bad credit loans, others in used boat financing. Boat finance terms and rates vary among lenders, but generally, the lowest available rates are reserved for those with better credit ratings and shorter term terms.
When you shop for boat financing rates, keep in mind that factors such as the age of the boat, the value of the vessel, and years of operation may affect the overall cost of the financed amount. For example, a five-year-old boat will likely cost less than a fifteen-year-old boat that has been regularly used. Also, a boat that has had a recent major engine overhaul may carry a lower interest rate than one that hasn’t. Lenders also offer flexibility when it comes to both terms and length of financing. For example, some will allow you to finance more years at a lower cost than others.
Be sure to find out exactly how much the loan cost before you agree to any financing terms. If you are going to get a low interest rate loan that runs for only five years, you must budget to spend at least five years at that rate. Likewise, if you are planning to get boat loans that last fifteen years, you must budget to spend at least fifteen years at that interest rate. Make sure that you understand what the total monthly cost will be before you sign your name on any papers.
The monthly payment you can expect for boat loans will depend on the lender and the type of loan term. However, most borrowers overestimate their payments, assuming that they can pay extra each month. If you are going to use a boat loan calculator, you can plug in your expected payments, including those for interest and taxes. This will give you a better idea about what you can realistically afford.
Keep in mind that some lenders may not offer certain financing options. For instance, if you have poor credit, there is a chance that your first lender may not offer you a traditional secured loan, such as a mortgage. Some lenders may also charge very high interest rates or require very high payments. A smart borrower knows that they should comparison shop several different lenders and select those offering the best terms, interest rates, and other financing options.
Before you decide on a financing option, find out what the lender’s or broker’s minimum payment requirements are. You also want to consider the lender’s or broker’s long-term debt-to-income ratio requirements. Remember that you will have to make monthly payments towards your boat loans for the foreseeable future; a good lender will be one that has low, medium or high-average debt-to-income ratio requirements. This means that your monthly payments will have to increase significantly over time as compared with a buyer who refinances his mortgage.
Before you finalize any financing agreements, always make sure that you understand the terms and conditions clearly. Also get estimates from several different sources, so that you know what kind of boat loans you are getting. By doing so, you ensure that you have chosen the best deal available and will have enough money to finance your boat purchase.