I recently did an interview with the Vice President of one of the largest marine lenders in the country where she shared 5 Important Things Boat Buyers Need to Know About Marine Financing. Because she revealed a lot of inside information, I’ve decided to withhold her name from this article.
- In general, what types of things should boat buyers look for when searching for a boat loan?
A buyer should look for a loan that is Simple Interest (you only pay interest for the days that you have the money extended) and that has no prepayment penalty. They should also look for competitive Rates and Terms with down payments around 10 to 20%.
- Some people think boat loans and car loans are similar. Can you tell my members some of the major differences between the two and why that matters to them?
A Boat or Yacht is a luxury item, so the qualification can be stricter. The bank will look at an individual’s net worth and liquid assets, as well as credit history and ability to make the payment. Each lender has a different appetite, and that is where working with the right person or business can save a lot of time for a client, versus the client searching each bank themselves.
On larger Boats and Yachts, the way a client takes ownership can be different as well. With a car, it is titled through the individual state that it will be used in. When it comes to larger boats and yachts, the titling is filed on a Federal level with a Mortgage but that’s only necessary for boats over $100K to $250K.
Let’s look at an example of a boat versus a car loan:
- $50,000 auto loan at 2.99% will typically have a payment around $760/month
- However, a $50,000 boat loan would have a monthly amount of only $350/month
Now, these are just examples and rates and terms will vary depending on the buyer’s credit history, upfront investment and age of the boat but you can expect a boat loan payment to be around ½ that of an auto loan.
- Now, many of my clients are self-employed or have a large portion of their income from commissions or bonuses. What should they expect during the process when setting up their financing?
Typically the financial institution will use a two year average of the individual’s income. With regard to being self-employed, different banks underwrite different ways. This is another way that working with the right company can be helpful. They will know which bank best fits a client based on the client’s tax return and how they report their income etc.
- In addition to helping finance boat purchases, do you offer programs to refinance or restructure current boat loans?
SURE! In today’s market, rates are really getting low. It is the perfect time to refinance, if you are planning to hold on to your existing boat and want to save some interest.
- You mentioned in a previous conversation that sometimes you can help finance when a regular bank or credit union has declined them. How are you able to do that?
A lot of banks don’t have an appetite for boat loans. They don’t understand the product. Sometimes they offer such short terms and high rates, that the debt ratio skyrockets. Some lending institutions offer terms of 15 and 20 years and the rates are more competitive than almost any branch of a bank.
And, as I mentioned previously, different banks cash flow clients differently. What doesn’t make sense to one lender may be no problem to another lender. That’s where using an experienced and knowledgeable lender can save you hassle and money when financing a boat.