Getting a boat loan: what you need to know
Setting sail on the water is a dream for many Americans. And in 2020, that dream has become a reality for many new boat captains, with recent powerboat sales increasing 12% from 2019, according to the National Marine Manufacturers Association. With an average price of $ 37,000 for a traditional powerboat, many of these new boat owners likely needed a boat loan to purchase their boat.
If you’re looking to get into the water, read on to learn about your boat financing options and how to apply for a boat loan. Then check out an online lender market like Credible for loan resources and find competitive rates suitable for you.
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What is a boat loan?
If you’ve ever had a car loan, you already have a good idea of how a boat loan works. Both are installment loans for a specific loan amount. You pay fixed monthly payments, including interest, for the duration of the loan.
But boats can be more expensive than vehicles, so many lenders offer extended repayment periods on boat loans – typically 15 to 20 years – to make monthly payments more affordable.
Whether you have bad credit or excellent credit, boat financing can be made easy by using Credible’s tools to complete your loan application. Depending on the lender, loan processing and approval time can take place as early as the same business day.
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4 types of boat loans
Regardless of what type of vessel you wish to purchase, your boat financing options will include secured or unsecured loans.
1. Secured loans
A secured loan is a loan backed by collateral that protects the lender against financial loss if you do not repay the loan.
Since the boat serves as collateral, a secured boat loan usually carries lower interest rates than unsecured loans.
2. Unsecured loans
Since unsecured loans do not secure your boat – or any other asset for that matter – lenders consider them to be riskier than secured loans. As a result, these loans come with higher interest rates and shorter repayment terms than their secured counterparts. Unsecured loans generally have more stringent lending criteria including an excellent credit rating and stable income.
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3. Home equity loans
A home equity loan is a type of second mortgage that uses your home as collateral. If you have equity in your home, you can take part of it as a loan to finalize the purchase of your boat.
Because your property serves as collateral for the home equity loan, interest rates are generally lower than unsecured loans. However, the lender can foreclose on your home if your loan defaults, which is a significant risk that you need to consider.
4. Personal loan
You can use a personal loan for many purposes, including buying a boat. These are also unsecured loans, so you won’t have to offer your boat or other asset as collateral. Your qualification depends solely on your creditworthiness and income.
If this boat financing option interests you, Credible can easily help you find the online lender, rate, and loan term that matches your personal financial situation.
HOW TO FIND THE BEST PERSONAL LOAN FOR YOUR NEEDS
Who offers boat loans?
Banks, credit unions, and boat dealers are all familiar places to look for a boat loan. With a good credit rating and sufficient income, you can find pleasant financing terms. However, traditional lending institutions are not your only option.
Lenders in the online market offer another cost effective method of boat financing. The Credible Marketplace makes it easy to explore personal loan options and get responses from experienced loan officers.
Before choosing your lender, do your due diligence and check lender complaints on the Consumer Financial Protection Bureau (CFPB) and Better Business Bureau (BBB) websites.
WHAT TO DO BEFORE APPLYING FOR A PERSONAL LOAN
What do you need to get a boat loan?
Here are three steps you can take to improve your chances of getting a boat loan.
1. Check your credit
Before applying for a personal loan, check your credit scores, which you can often find for free in your online dashboards for your bank and credit card accounts. You can also retrieve your top three credit reports – for Equifax, Experian, and TransUnion – for free at AnnualCreditReport.com.
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2. Dispute Credit Report Errors
Carefully review your reports for discrepancies and errors and have them corrected immediately. The Federal Trade Commission (FTC) reports that one in four consumers have identified errors on their credit scores that could affect their credit scores. Unfortunately, a single mistake can hurt your credit score and negatively impact your chances of boat loan approval.
With a credit monitoring service, you can receive instant alerts about late payments, fraudulent activity, credit score changes and more. Check out some of Credible’s partners here.
3. Pre-qualification for a boat loan
Pre-qualifying for a loan helps you determine how much boat loan amount you can afford. You can be prequalified with several lenders while you search for the best loan. Consider using Credible’s tools for this step, as they can help simplify the loan application process.
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Hitting the water in your own boat is an unforgettable experience. But unless you’ve saved up a load of cash, you’ll need a loan to make your boating dreams come true.
Getting the boat loan that’s right for you starts with making sure you only borrow what you can comfortably repay. Use a personal loan calculator – like the one from Credible – to estimate your fixed monthly payments and see how they fit into your budget.
Before committing to a loan or lender, compare the best personal loan interest rates, repayment terms, and fees to make sure you get the best deal.
Have a financial question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.