Boat Financing Made Simple
Boat ownership: Big fun, and a big expense! We know this isn’t exactly news to anyone. The good news is that it’s a common and easy undertaking to get a loan to buy your boat, just like you have probably done for your house or car. The process of financing a boat purchase is fairly similar, so it should be pretty straightforward if you have borrowed before. If you want a boat, and you’re not one of the chosen few who can pay cash for it, read on to learn more about your options.
Financing your purchase is one of the many services we offer, so we are able to answer your questions, whether or not you choose to finance through us in the end. Give us a call at Gagnon’s Boats and Motors with your questions, or come by for a visit to our spacious heated showroom in Livermore Falls, Maine. We’ve been family-run for over five decades, and we are 100% dedicated to customer satisfaction.
Boat loans are set up as installment loans, requiring fixed monthly payments over the course of several years. The interest you pay depends on a variety of factors, including the amount of the loan; the lender; your income and credit score; and the type of loan (secured or unsecured). Currently interest rates are at historic lows, which is great for buyers.
With a secured loan, the boat you’re buying serves as collateral if you fail to repay the loan. If you don’t keep up with your payments, the financing company’s first step would be to repossess your boat. Secured loans have lots of advantages, though, with lower interest rates, higher limits, and long repayment terms. This is your best option if you require more money upfront, or if you don’t want or don’t qualify for an unsecured loan.
Unsecured loans have higher rates and shorter terms and do not require collateral. If you default on an unsecured loan, you don’t need to worry about your new boat being repossessed, but you could face a big drop in your credit score, wage garnishment, and lawsuits.
Where to Get a Boat Loan
Any big financial commitment takes some research and due diligence. Always shop around and compare terms and conditions. Lots of banks and credit unions offer boat loans, and marine lending specialists do nothing but. Here at Gagnon’s Boats and Motors, our financing department is dedicated to helping you with the loan process.
Checking with your current bank is always a good first step. They will generally offer a lower interest rate to existing customers. Rates vary depending on the loan size and the applicant’s credit score. Expect loan size to vary from four digits on up, depending on your qualifications and need. While existing customers may get the best deals, you can still pursue loan options at any bank.
Credit unions are nonprofit membership-based organizations. Expect to see fewer options and lower rates. Some credit unions are affiliated with specific geographical areas or industries. In some cases, they are more receptive to applicants with poor credit. Secured loans are their usual product, so expect that your new boat will be collateral. Credit unions may offer a higher total loan amount with a lower interest rate.
Marine Lending Specialists
These folks have lots of knowledge and experience with marine lending options. They serve as brokers to help you secure a loan, they do not represent lenders and they don’t lend. They can help you compare the options from credit unions and banks, and the rates and terms they’ll find for you will probably be comparable to what you could find on your own. Marine lenders will work with secured loans, which will typically require a downpayment of 20% or less.
Other Financial Considerations When Boat Buying
The number one consideration: Please be realistic about how much you can afford to pay every month for your dream boat. Use one of the many online loan calculators to understand exactly what you are getting into. Think carefully about whether you can afford it in the context of your income and other expenses.
That means considering all those other expenses beyond the purchase price. You need to calculate how insurance, licenses, slip rental or other summer storage space, winterizing, winter storage, a trailer, fuel, maintenance, repairs, and supplies will all add up. Try to anticipate those expenses over the course of the year, and calculate the total on a monthly or annual basis. Buying a boat you can’t afford is actually not very fun in the long run! A boat should bring you pleasure, not stress.
What about the future? Life happens, things change. What if you want to sell your boat? A new boat will depreciate quickly, especially during the first year or so of ownership. With a used boat, someone else paid for that. Consider what price you could expect and how easy it will be if you were to decide to sell your boat in the future.
With any decision of this scale, it’s so important to take the time you need to fully understand what you are agreeing to before you sign anything! Read terms carefully, ask all the questions, and consider your financial situation when you make a decision.
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