There are several types of boat financing available, including dealer financing, manufacturer financing programs and boat loans from banks or credit unions.
It is always advisable to research various methods of boat financing before you make any decision. There are sites available online where you fill out an application and the site sends it on to a large number of companies offering boat loans. The lenders will respond to you with information about what type of boat loan they are willing to offer you and what the terms of the loan are.
It is also a good idea to check with your bank or credit union when you with to borrow money to purchase a boat. In some cases, a line of credit from your bank will be a better option than a standard boat loan.
It is common for boat dealers to assist their customers in obtaining boat financing, but the loan is rarely offered by the dealer. Instead, the dealer helps you secure a loan with a third party lender. You will normally not need to visit this lender; everything can be arranged from the boat dealer’s place of business. The boat is used as collateral for the loan.
Manufacturer financing programs
Manufacturer financing programs are offered by many major boat manufacturers to promote the sales of their boats. The boat is used as collateral for the loan.
Since manufacturers are very interested in selling their boats, they will often (but not always) offer excellent terms on their loans. You may for instance be able to obtain a boat loan where there is no interest to be paid during the first two years, so that 100% of your monthly payments during this time can go towards getting the principal down.
Manufacturer financing programs are usually offered through boat dealers, especially boat dealers that specializes in boats from one or a few select manufacturers. If you purchase your boat from a private seller rather than from a licensed boat dealership, obtaining manufacturer financing can prove difficult.
Loan from a bank or credit union
Some banks and credit unions offer boat loans where the boat is used as collateral, while others will ask for some other collateral, e.g. real estate. If you are a highly desirable customer with a good credit rating, you may even qualify for an unsecured loan.
If you use your home as collateral for a boat loan, you risk losing it if you default on the boat loan.
When you compare different types of boat financing, you should take the length of the loan into consideration. If you are buying a boat that you intend to keep for a long time, a long-term loan is often a good choice. If, on the other hand, you only intend to keep your boat for a while (e.g. because you plan on trading up to a more expensive boat eventually), look for boat loans that is flexible when it comes to early payoff.
Obtaining 100% boat finance is unusual. Most lenders will require that you pay a part of the boat yourself at the time of purchase, and in some jurisdictions they are even forbidden from giving you 100% boat financing.
This is an important factor to take into account when comparing your various boat financing options. 90% boat financing is common, but you may be able to negotiate a better deal if you are willing and able to decrease this number further.
It is also important to keep in mind that most boats decrease in value over time, even when they are well maintained. If you obtain a 90% boat loan or bigger, and then only make minimum monthly payments on the loan, your boat may soon be worth less than what you owe on it.
If you use your boat as collateral for a boat loan, the lender will place a lien against the boat and will typically also require you to ensure the boat well against both physical damage and loss.
If you are interested in purchasing a boat, pre-qualifying for a boat loan will make the process easier. You will find out how much you can borrow and how much of a boat’s value that the lender is willing to lend you if the boat is to be used as collateral. Of course, buying the most expensive boat you can afford is not always advisable, but being pre-qualified will give you a ballpark to stay within and you can avoid spending time and resources chasing down boats you won’t be able to purchase anyway. Also, in most markets, a boat that is offered for a good price tend to sell quickly. If you are already pre-qualified for a boat loan, you can finish the deal rapidly when you come across something good.