If you dreamt about owning a boat for business but couldn’t because of financial issues, now you can. You can purchase boats and related vehicles with boat loans. With this, you can spread the costs of buying a boat just like you do with other automotive loans like- car finance, motorbike loans or car loans. You pay an agreed amount by the end of the loan term. However, the amount you pay depends on your interest rate, the amount you borrowed and the period.
How do boat loans work?
If you had a car finance, you may be familiar with the chronology. You borrow some amount, provide a deposit and pay the dues in equal instalments throughout the loan term.
Similarly, you can apply for secured and unsecured boat loans for up to 20 years. However, unsecured boat loans or personal loans come with shorter repayment terms. It typically lasts for about 5 years here.
Check the flexibility and total loan costs before choosing the repayment tenure. Choosing a longer repayment tenure implies high interest rates but low monthly payments and vice versa. It could be ideal for individuals with low or irregular income.
Once you meet the lender’s criteria, you may get the loan. Making timely payments helps your credit score. However, skipping payments in secure and unsecured boat loans may hamper credit scores. In a secured loan, you may lose the boat as well.
What can you use a boat loan for apart from buying a new one?
Marine lenders have restrictions on using the boat loan. However, when you know things you can use it for, you can utilise the opportunity accordingly. You can use it to buy a new or a used boat. Apart from that, you can use it for purposes like:
a) New boat construction
A boat loan could help you finance a new boat or yacht construction if working with a ship-builder.
b) Repairing an existing boat
Renovating and repairing a boat can be costly, thus splitting costs with boat loans. You can finance the expenses needed with a boat loan.
c) International boat delivery
International boat shipping costs can add up to several dollars. Thus, if you need to sell a boat offshore, you can finance your needs with a boat loan.
What unique boat loan types can you benefit from?
There are unique ways to finance the costs of your boat with a boat loan. It splits into multiple financing options:
1) Unsecured boat loans
As mentioned above, you can finance boat purchases with secured and unsecured loans. In unsecured loans, you can do so without pledging any asset as collateral. It is ideal for individuals with good credit scores but minimal assets. However, unsecured loans have more competitive interest than secured loans. By improving your finances, you can get better rates on unsecured loans from a direct lender. You can do so by updating your credit report, paying some debts, improving income sources, and borrowing a lower amount than required.
2) Secured boat loans
Unlike unsecured loans, secured loans require one to put up an asset as collateral to get the loan. The asset should value the same or more than the amount requested. The boat itself acts as collateral on the loan when buying a boat. It implies that you may lose the boat if you cannot pay the dues within time.
It is ideal for individuals seeking low interest rates and monthly payments. You can get a higher sum as a credit than an unsecured loan to finance the boat purchase.
By providing assets as collateral, you can reduce liabilities towards loans. Eventually, you get an affordable loan agreement with a secured loan.
3) Home equity loans
It is also one of the best ways to finance a boat purchase. You can provide the equity in the house as collateral to the lender. The finance expert determines the property value according to the existing and future rates and provides the loan. However, you must be a homeowner to leverage the loan.
Decide how much you need and the percentage of the property equity share you can stake. If confused, contact the lending experts to analyse. They will help you calculate the exact share to put up as collateral.
However, just like secured loans, you must maintain regular payments on the loan. If you fail to pay the dues by the term’s end, the lender may repossess the equity or the house part. It may impact your credit score and the overall house value.
4) Debt consolidation loan
Debt consolidation loans are all about utilising the existing debts to your profit. Explore and check the best and most affordable debt consolidation loans from a direct lender near you. By consolidating loans like- payday loans, doorstep loans, student loans, car loans, car finance, credit cards, etc., you can finance the costs of your boat purchase. The loans help you cover the costs by reducing your liabilities towards multiple lenders. Instead, you deal with a single lender for your monthly payments. It is the best way to reduce interest costs, and monthly payments and improve credit scores simultaneously. However, analyse whether it is the right thing for you or not.
5) Personal loans
Personal loans are unsecured loans that you can use for any purpose, including boat financing. Interest rates on personal loans can vary significantly. These are generally fixed-rate loans. Here, you can borrow a fixed amount of money for a fixed time frame, like- 3-10 years. The loan providers provide one by analysing parameters like- employment history, income, profession, liabilities, repayment ability, loan tenure, etc.
What to consider before applying for a boat loan?
You may qualify for a boat loan if you can meet the basic age and citizenship requirements apart from affordability. However, not everyone qualifies. It is the reason you must consider some aspects before applying:
1. Your credit score
Your credit score helps you qualify for better interest and affordable loan terms. Individuals with poor credit may not get boat loans like- secured ones. For that, you must have a stellar credit history. Thus, improve minute aspects of credit like- timely bill payments, reducing over expenses, reducing using credit cards often, updating personal information (address), etc. It improves the credit score.
2. Ability to pay the loan
Identify your existing finances, liabilities and income to get a new boat loan. Check whether you can afford the loan with interest charges and penalties (if any). Or you can wait and save for the boat. It is important as non-repayments could adversely impact finances and credit scores.
3. Ownership charges
Sometimes, the price of the boat is just the beginning. You may see other costs approaching you soon, like maintenance, repairs, taxes and storage. Consider this before buying one.
Thus, you can finance the boat purchase using the abovementioned method. It depends on the affordability, the risk you can take, the flexibility and the convenience. Generally, personal loans and secured loans are the best way to finance a big item purchase. It also helps you improve your credit score with regular payments. So, decide the best for your next boat purchase.