Buying a boat is a big decision, and you want to make it without worrying about how you will pay for it. With boat finance, you can do just that. Boats can be borrowed just like cars, but there are some rare situations where they might need unique financing options. Here’s everything you need to know about getting the best deal on your boat financing.
Boat financing is just like car financing
Boat financing is just like car financing, but with a few exceptions. Lenders usually require you to secure the loan with the boat instead of your credit history. The lender may want to inspect the vessel before approving the loan, and they’ll almost always demand collateral if you default on your payments.
Car loans are secured by your car and its title. Boat loans are guaranteed by the boat itself and its title (i.e., vessel lien). This means that if you stop paying on a boat loan and don’t have enough cash flow to repay it out of pocket, the lender can repossess/take over ownership of your vessel until all outstanding debts have been paid off or discharged through bankruptcy proceedings.
Because boats are expensive items that depreciate quickly over time (especially if not used frequently), interest rates tend to be higher than those offered for cars or homes. This makes sense since lenders consider boats more risky investments than cars or homes because there’s no guarantee someone will be able to use them once purchased.
Getting pre-qualified for a boat loan
Pre-qualification lets you skip ahead in the paperwork process of boat finance because lenders know what kind of financing they can offer based on your income and creditworthiness. You’ll be able to focus on finding the right boat instead of gathering financial documents that prove what kind of credit score or debt load you have, a process known as “qualifying” or sometimes referred to as “approval”.
Boat loans similar to home loans
Boats are homes, and they can be financed like homes. The same loans people use to buy houses, mortgages and home equity loans are also available for boats. The most significant difference between a boat loan and a home loan is the interest rate; mortgage rates are typically lower than boat loan rates in any given market.
Used boats are a little cheaper to finance than new boats
A used boat has a lower price tag than a new boat. This means that you’ll have to finance less of the purchase price, and your monthly payments will also be lower.
The reason is simple: Used boats have less depreciation, meaning they retain their value over time better than new ones. They’re also more likely to have a higher resale value because they’re in better condition and more desirable with fewer miles on them. Plus, if you decide to sell the boat after you’ve paid off your loan (or before), the lender will be able to recoup some of its investment when it sells the vessel off again at auction or through an online marketplace. It’s possible that you could even end up with enough cash left over after paying off your loan that it makes sense just to keep driving/riding around in it.
The lender might need to inspect the boat
Before you can get a loan, the lender will need to inspect your boat. The lender will want to ensure that the boat is in good condition and can be insured. If they are unhappy with what they see, they may not give you a loan.
Sometimes, the lender might need to take out insurance on your behalf before approving your loan. This means that if anything happens to the boat while it’s being financed by this company (for example, an accident or theft), then this company would pay for any repairs or replacements instead of you having to do so yourself as soon as possible.
