Do we even need to state that a boat is an incredible investment? You knew that already, didn’t you? That’s probably how you ended up here in the first place.
Not only is a boat a status symbol, if you choose the right one it can become your own vacation retreat, one you can sail wherever you like.
But there’s a catch.
Many boat owners say that the two happiest days a boat owner experiences are the day they buy it and the day they sell it.
A little harsh isn’t it?
True, buying a boat and keeping it in check can both prove to be a significant challenge, especially if you don’t know how to finance your purchase. The same goes for the boat you are buying. If you don’t know much about boats and you are buying a used one, you should consider hiring an expert to conduct a marine survey. You can learn more about marine surveys at this link: http://www.pcesandiego.com/blog/marine-surveys-san-diego.html#.WW3b1IiGOUk
Owning a boat does not have to be a nightmare. It can be the idyllic retreat you’ve always dreamed of. You just have to be smart about what you purchase, how you finance and how you take care of it. In this article, we’ll help you with the financing aspect of buying a boat.
Since a boat is a vehicle, you can choose from several different loans. Depending on your credit score and your overall financial situation you might be able to finance a boat through a traditional loan, a personal loan, a seller loan or a home equity loan. All of them have their good sides and their bad sides, but one is bound to be perfect for your financial situation.
Collateral loans are not that different to secured car loans. In this case, your boat is your collateral. In case you stop making regular payments, the lender can repossess the boat. Since the loan is secured, however, the rates are significantly lower.
Since the process is similar to getting a car loan, most people will find it familiar. Since the boat is the only collateral, it is the only thing you risk losing if your financial situation gets worse and you are unable to make payments. However, you should know that there are usually down payments that are deducted from the purchase price.
If your credit score is good, you can opt in for a personal loan. However, not all banks offer the same conditions, so make sure you do your research and find the one that offers the best ones. There’s also a down payment involved, usually no more than 15% of the total price.
If you already have a connection to the bank, meaning if you have been their client for a while, you might be able to negotiate a better deal. You can also get a better interest rate for a larger down payment sum. Be aware that interest rates are much higher when buying a boat than a house or a car because the banks use this as leverage.
Your seller might be able to offer a loan without having to go through numerous bank contracts. This is a great option and you can get a fairly competitive price as a result. This method is great because it’s simple. You get to buy a boat and get financing for it at the same place. It is up to the seller to handle the paperwork and get your loan approved. You can even try to negotiate buying a boat without a down payment but at higher rates.
Home Equity Loan
You can use the equity in your home, if you have any, to take out a loan and finance your boat purchase. In fact, these loans can be used for almost anything. Since the loan is secured by your home, you may be able to negotiate a tax deduction for your loan interest payments. However, not every homeowner is qualified, so make sure you consult an expert first.
However, since your home is used as the collateral, if you stop making monthly payments you risk losing your home to the lender. Furthermore, in this scenario you will also have to pay for the home appraisal. This is what makes this option a road less taken, even though for some it might be a perfect choice, as having their home as a collateral might encourage them to pay off the loan faster.