So you have finally decided on the boat that you want to buy, now the next step is for you to review available boat financing options for you in order to seal your purchase.
First you should decide on where to secure your boat financing and determine the amount of your loan. Once you have done this, you can take a look at the loan options that your selected bank of financing organization offers its customers. Or you may choose to do it the other way around. Decide on the financing option that you want and then find where you can best get your desired arrangement. Either way, your boat broker should be able to help you with the whole process.
General terms of boat finance contract
Generally, you should expect your boat financing agreement to have the following features:
· Payments will be structured to suit your budget and or needs.
· Finance terms - range from one year to five years or even more
· Fixed repayments allow for your budgeting needs and protect you against interest rate fluctuations.
· A deposit is generally not required. Alternatively if a deposit is made then a reduction in repayments, interest and term will be the major benefits.
· If your boat is to be used for business purposes you may qualify to claim part of the interest and depreciation as a tax deduction.
· Equity in your marine purchase can be increased, by making additional payments.
· Direct debiting of your monthly repayments can be arranged.
· Funding can be agreed to in advance giving you the ability to negotiate from a position of strength.
Loan options
Specifically, you must consider several factors before you finalize your boat financing arrangement. First, you need to determine how long you intend to keep the boat that you are buying.
For an entry level first boat, it makes more sense to get a flexible loan term in case you are able to pay it early through a private party sale or trade-in. But if you are buying a boat that you think you will keep for a long period, then go for a fixed rate loan with terms that will require low monthly payments.
How does fixed rate and variable rate loans differ? As the name suggests, fixed rate loans have a guaranteed, fixed rate over the entire duration of the loan. This works best for those who want to work with fixed budgets, as monthly payments do not change. However, the interest rate applied to fixed rate loans tend to be higher. Variable rate loans usually start with a fixed rate period, usually for one year, then the applied rate fluctuates over the remainder of the loan.
Aside from the loan itself, you should check for other loan-related fees such as processing and underwriting fees, appraisal fees, the cost of a credit report, tax service fee, application fee and others.
Another factor to consider is the down payment. Most lenders would require at least ten percent down for a boat loan. In certain cases, lenders would allow those with good credit rating to put zero down payment.
Payment options
Try to look for banks that offer more than the typical monthly payment schemes. Seasonal payments, say quarterly, may work best for certain financial profiles such as those whose incomes vary based on seasons. Examples of these people are contractors, sales representatives, retailers, consultants, among others.
Those who receive large seasonal bonus, on the other hand, may find annual payments more attractive. With this option, customers pay just one payment a year, and can use the succeeding months to prepare for the next payment.
Others who want to save on finance charges and want to pay the principal faster could go for biweekly payments.
Working with a boat finance brokerage will help boat buyers in getting the ideal boat financing arrangement that works best for them. Just as being thorough is an important quality in choosing the right boat, so securing the right boat loan is equally as important. A good financial broker should be able to walk you through the various options that best fit your profile.
The faster you get good financing for your boat, the faster you can proceed to enjoy it.
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