Loan Options

The Best Loan Options For Financing A Boat Purchase

People are starting to plan their vacations as the Government eases up on the implementations correlated to the COVID-19 pandemic. Tourist destinations have started to open their doors for tourists, which is why people are looking for a way to have a safe vacation. 

One way to ensure you and your family's safety is to have your own boat to use during your vacation. By having your own boat, you can make sure that you won't have to interact with other people and avoid being infected with the coronavirus. 

But if you only have limited savings, purchasing a boat by cash would be difficult. Fortunately, there are other ways you can own your dream boat without spending a huge upfront payment. You can opt for boat financing, which will aid you in your boat purchase. 

Essential Steps on How To Get A Boat Loan

Getting a boat loan sounds easy. Choose the lender, apply, submit your requirements, and wait to get approved. But in reality, there are more factors you should consider before applying for a loan to avoid any problems in the future. 

Here are the necessary steps that you can follow when you want to apply for a loan. 

• First, you must pre-qualify for a loan. Visit each lender and inquire about their boat loans and know how much you can get. It would be best to ask questions, like how much are they willing to lend you and how much of the boat's value they will cover. 
• The second is to pick your boat, including its accessories, if any. Now that you already know how much a lender can finance, you can now choose the perfect boat that will fit your budget. 
• Third, research. Familiarize different types of boat loans. By doing so, you can choose the best option for you. You must know the pros and cons of each loan option so that you know what to expect. 
• Fourth, learn about the different types of interest rates and loan sources. 

Different Boat Loan Options 

It is better to learn about different loan options available to help you finance your boat purchase. Below are the three loan options that you can choose from depending on your capability and qualifications. 

Collateral Loan

This loan option is also known as a secured loan, and the boat you will purchase will serve as the collateral of your loan. Secured or collateral loans have higher loan limits and low-interest rates with a long repayment term. 

The risk in choosing this option is that your boat will be forfeited in case of default. This loan option is made available for individuals who are not qualified to take on unsecured loans or for individuals who wanted to borrow a higher amount of money to finance their boat purchase.

Most individuals who opt for a secured loan are the ones who have a bad credit record. However, some lenders consider giving bad credit individuals a chance to apply for a loan, such as My Financing USA boat loans that offer consumers a bad credit loan. 

Unsecured Loan

Unsecured boat loans do not require any collateral, including the boat you purchased. However, without any collateral as a security for the borrowed money, rates for this loan option is higher, and it has a shorter loan term compared to a secured loan.

You may not lose your boat if you missed paying your monthly obligations, but it will damage your credit score instead. The lender can also sue you if you neglect your payment obligations. 

Individuals who are eligible for this loan option have a good credit score as it does not have collateral for the money you borrowed. A bad or low credit score is a clear indication that a borrower is incapable of meeting the payment deadlines, which results in delayed or missed repayments. This makes lenders wary of borrowers that have poor credit scores, often rejecting their application for this loan option.

Home Equity Loan 

A home equity loan can also be an option for you. When choosing this loan type, your home will become your collateral. In case of default, the lender will foreclose your home as the payment of the money you borrowed to purchase your boat. 

Before you can acquire a home equity loan, you will need to pay for your home's home appraisal and closing cost first. This means that you will need to spend some cash before getting a loan for your boat. 

Different Types of Interest Rates

Just like other loan options, it is also essential to understand different types of interest rates that you might encounter when taking out a boat loan. There are three interest rates: the nominal interest rate, the real interest rate, and the effective interest rate. These interest rates are described below: 

• Nominal Interest Rates

A nominal interest rate is the rate of your loan's interest before considering inflation. It is also the declared interest of a loan that lenders advertise before any fees and compounding interests. 

• Real Interest Rates

It is the rate of interest after adjustments to take out the effects of inflation. It reveals the real cost of the loan and the real gain of the lender. The real interest rate depends on the estimates of anticipated future inflation throughout the loan.

• Effective Interest Rate

Effective interest rate is an interest rate that calculates compounding throughout your loan term. It also shows the percentage rate of the loan you acquired. The effective interest rate is also known as the annual equivalent rate. 

These different loan options and interest rates are not only applicable for boat loans as it also covers different loans, such as RV loans, car loans, and the likes. Next time you apply for any loan, you’ll know and choose the right options that fit your lifestyle and needs. 

Takeaway

Knowing more than one loan option for your boat financing is best before acquiring a loan. Having many options will help you choose the best one to fit what you need and what you can afford. So many lenders offer various loan terms and familiarizing each of these offers will help you end up with the right one. 

Author's Bio

Lauren Cordell is a full-time content writer that focuses on finances and travels. Her articles include topics about boat loans, RV Financing, and inexpensive travel suggestions and tips. Lauren grew up in a family that loves RVing, which sparked her interest in this particular topic.