Once you’ve made your decision to buy a boat the first thing that usually crosses your mind is, “How am I going to pay for it.” The majority of purchases involve some level of boat financing, whether it’s a credit line through the home, an unsecured loan, or a conventional boat loan. Choosing the right financing source can be as important as choosing the right boat.
What Type of Boat?
There are several factors to take into consideration when choosing a boat finance source. The first might be to determine how long you intend on keeping the boat. If you are purchasing an entry level first boat, it will make sense to find a boat loan that will be flexible in the event of early payoff through a private party sale or trade-in. Conversely if you are purchasing the boat of you dreams and expect to have it for a long time it will be important to lock in at a fixed rate loan with terms that will allow the comfort of a low monthly payment. This will allow you to make sure the boat will always be affordable in future months.
Boat Down Payment
Another factor to consider is the down payment. Most lenders would like to see ten percent down for a boat loan. However, zero down scenarios do exist for people with optimum credit profiles. Generally, the down payment does not significantly effect the monthly boat loan payment. You may be more comfortable keeping the extra money in your account in exchange for a payment that is not significantly higher. However, there is one caveat to this approach. If you buy a boat with zero down, make minimum monthly payments and then decide to sell the boat soon thereafter, you may actually owe more than it is worth.
The recent combination of high property values and low interest rates has made home equity loans and credit lines a viable option for boat financing. This option can be particularly good for individuals with a challenged credit profile. These loans are based on the equity available in the home and can allow a person with poor credit to get affordable terms that otherwise would not be available. The drawback to these loans is that the home equity is now tied up in a boat purchase. Conventional boat loan rates are very low. A person who can qualify at agreeable terms is usually better off with a conventional boat loan. This will allow a person to keep the equity in the home for an emergency along with the ability to sell without encumbrances.
Final Thoughts on Financing
Choosing the right boat loan is an important step in the buying process. A good place to start is with a boat finance brokerage, that can show you how each of the options will fit into your profile. This will give you the ability to find the loan that fits you best. Then you can concentrate on the important stuff – like your first trip to the water.