Securing a boat loan
10 tips to get the right boat loan
- Check your credit. Before applying for a loan, check your credit report for accuracy and to get your current credit score. A score near 700 and up will get you a better rate.
- Find the right loan type. A fixed-rate, fixed-term, simple-interest loan is the most common. This offers the same monthly payment for the life of the loan. Variable rate or hybrid options may offer a combination of a fixed rate for a few years then a variable rate. Don’t forget to ask if there are prepayment penalties for paying off the loan early.
- Compare loan rates. Generally, rates are lower and available loan terms are longer for newer boats with larger loan amounts. Each is dependent on a variety of factors including model year, loan amount and down payment. Be prepared for lenders to require larger down payments, have higher interest rates and offer shorter terms on older boats, especially models over 20 years old. Consecutive model years could have a .25 percent interest rate difference. Talk with your lender and understand its rate and term structure.
- Don’t be fooled by ads. You may see low rates advertised, but look for the small print, which could make the loan less attractive. For instance, the loan rate might be fixed for only a few years or the loan period might be only seven years.
- Get pre-approved. Ask if you can get preapproval or if your lender allows you to start the underwriting process before you have a signed sales agreement. This may save time.
- Consider a HELOC. Using a home-equity line of credit to buy your boat might work if you have equity and plan to pay off the boat while interest rates remain low. Unsecured loans (loans not secured by your boat) are also an option for well-qualified individuals.
- Explore tax benefits. You could qualify for a second-home loan interest deduction if your boat has a berth, head and galley, so buying a boat large enough to have these features could offer a tax advantage. The second-home deduction has an overall limit: You can only deduct two homes with no more than $1 million in loans. With the HELOC, the threshold is $1.1 million.
- Get it surveyed. While you might think the boat is perfect, hire a qualified marine surveyor to inspect the boat to ensure you won’t have any unexpected repair bills. Many lenders will require a marine survey.
- Ask about closing costs. As with any loan, boat loans have fees involved, including sales tax, processing fees, and title and registration fees. Check with your lender to find out what to expect.
- Calculate your monthly payment.Wondering how much of a loan you can afford? Check the BoatUS online calculator to compute monthly payments. Your lender will also review your debt ratio and other criteria.