5 Things to Know Before Financing a Boat
For anyone considering the purchase of a boat or yacht, the best thing you can do to prepare for the process is to educate yourself on financing.
When in the discovery or learning phase, things may be a bit overwhelming, especially if you are a first-time buyer. To help ease any concerns, some essential things to consider before financing are details such as the loan’s annual percentage rate, or APR, the length of the loan, and the amount you have to use for a down payment. Those factors can change the total amount you will pay for the boat of your dreams.
The more you prepare, the easier the process will be and the likelihood that your loan application will be approved. Before you start searching for your dream yacht, below are a few things to keep in mind to make the decision that is right for you:
1. Understand your Credit Status
Like any other purchase requiring finance options, your overall credit standing can affect many of the loan details. A strong credit rating can positively affect the following and more:
The length of the loan
The interest rate
The amount you can finance
Whether or not you qualify for a secured loan
These days, there are a lot of ways to monitor and maintain your credit rating. Many credit cards offer services that can provide you with a monthly status report, ensuring you will know if your rating has gone up or down and why. Plus, you can get a free credit report once a year without impacting your overall credit score.
Reports like these can also help you spot any issues in your credit history and repair them when necessary. Discrepancies are not unheard of, so don’t hesitate to question something negative on your credit report.
Remember, the stronger your credit rating, the better your loan terms will likely be.
2. Be Prepared and Know your Financial Position
It’s always important to research and understand all the details surrounding large-ticket purchases, including your own financial position. Buying a boat or yacht can add unexpected expenses to any budget, so it’s crucial for you and the lender to know that you can carry those costs.
Your loan approval depends on the financing company’s understanding that you can repay the loan, so your creditworthiness may also come into play. Be sure to check your credit report carefully for any false or mistaken information that may need to be removed.
The more records you have up front, the easier it will be to estimate the loan terms you’ll qualify for and the amount you will need for the loan’s down payment. If you are uncertain about what is necessary, just ask! Knowledgeable agents are standing by to help every step of the way.
To help prepare, click here to try out our loan calculator and get a clear picture of what’s on the horizon.
3. Factor in the Ongoing Cost of Boat Ownership
The purchase price is only one part of the overall expense related to owning a boat or yacht. Like any vehicle, boats and yachts need maintenance and upkeep, but there are ongoing costs many people don’t consider before diving in.
Even the most basic yacht ownership costs will probably include the following:
A seasonal slip
Offseason storage in colder climates
Bottom paint to prevent growth on the hull
Filter and fluid replacement
Cleaning and detailing
Periodic insurance surveys
Some of the above tasks can be handled by the owner or crew; however, projects such as engine maintenance are better performed by professionals, especially if keeping a warranty active is involved. Off-season storage handled by a boat or shipyard is another cost, typically due to the space and equipment necessary.
Much larger yachts may also require full-time crews to operate and maintain the vessel, and this can be another costly expense. However, on another note, many yacht owners offer their vessels for limited charter to offset these costs.
In short, boats and yachts need regular maintenance and upkeep, or performance and condition begin to decline. Be sure to understand all the ongoing expenses associated with owning the perfect vessel that catches your eye.
4. Understand Interest Rates and Loan Terms
If you need to borrow money to purchase your dream yacht, prioritizing your understanding of the loan terms is a must. Be sure to educate yourself on loan details such as by noting the following:
Interest rates and APR
Fixed vs. adjustable rates
By understanding the relationships these have with each other can help you make the best decisions for your yacht loan terms.
5. Consider All the Options Carefully
When financing any purchase, the amount you put down, the interest rate, and any additional costs will create the big picture about how much you’ll pay each month. A larger down payment can give you a smaller monthly commitment, but a shorter loan can increase that monthly amount.
However, for example, paying more principal per month to cut the loan length in half might make a lot of sense for some, while others might feel the interest rates are low enough that the extra funds are better put to work somewhere else.
Consider the effect the details of the loan has on the overall amount, such as on the number of payments and the ancillary costs like insurance and storage. Also, consider how the vessel’s size will affect your total costs.
Be sure you understand the loan costs, terms, and any other expenses associated with financing your dream boat. Be prepared, ask questions, and comprehend your commitment before diving in.
We Have Your Answers
At Newcoast, we have the answers you need. Our financing team has decades of experience in the marine industry, and we can provide our clients with a 2-minute pre-qualification and loan approval in as little as 24 hours. We also offer competitive rates on up to 20-year loan terms.
Newcoast also provides insurance with the knowledge and experience to protect you once you’ve purchased your dream yacht. Visit our marine insurance page to learn more.
At Newcoast, we’ll get you moving and keep you protected along the way.
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