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Article #56: Boat Loan Basics

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Not too long ago, finding a lender that The Boat. You may be asked to provide:
made boat loans was difficult. Today, the About You:
challenge is deciding which lender to - Your complete name, address, phone
use. In an active boating market, you'll number
find several sources for boat loans, so - Employment details
it's a good idea to compare rates and - Verification of income (Tax returns for
terms to determine the financing best the last two years)
suited for you. - Details on homeownership
Looking out for the best interests of - List of monthly financial obligations
boaters and the boating industry is The (Credit cards, alimony/child support,
National Marine Bankers Association. NMBA mortgage/rent, etc.)
was founded in 1979 to educate current - Personal financial statement (Assets
and prospective lenders in marine and liabilities)
financing procedures and to promote the About the Boat:
extension of credit to consumer and trade Have all of the boat information
borrowers. Members of the NMBA include available for the application:
financial institutions such as commercial - Year, make, model, power, optional
banks, private financing firms, savings equipment and any upgrades
and loan companies, credit unions and - The total cost, which will include:
retail service companies. - Purchase price
Choosing a Lender - All equipment upgrades or additional
Some lenders have added boat loans to accessories
their more traditional auto and real - Sales taxes that must be paid at the
estate offerings, even deciding to time of purchase
specialize in boat loans by devoting - Registration, title, or documentation
funding and staff for the purpose. So expenses
where should you start? The Loan Underwriting
Your Own Bank Or Credit Union: Many Process


local, regional, and national banks are Getting boat loan is not a sure thing, or
members of NMBA and offer boat loans you may not qualify for the entire amount
directly to their customers. Start with you're applying for. Will you be able to
your own bank or credit union, and call buy the boat of your dreams? That depends
them or check their website to see if on several factors. The lender will be
they finance boat purchases. Inquire looking for "red flags" on your credit
about rates and how long a loan term is history.
available for the boat you are - Have you continually and satisfactorily
considering. made credit card and loan payments?
Financial Service Companies: These - Have you ever had a loan comparable to
organizations maintain relationships with the amount you're requesting?
local, regional, and national lenders, - Are you carrying debt that
giving them broad access to finance disproportionate to your income?
programs. Again, look for an expert in - Do you have a down payment that meets
marine lending, and membership in the the lender's guidelines?
NMBA. The lender will look at your present
Boat Dealers & Brokers: if you're buying monthly obligations, and then add the
from a dealer, it is likely that an monthly payment for the boat loan. They
on-staff NMBA Finance Manager will handle may also add the presumed operating and
the whole transaction, from assisting maintenance costs of the boat to see how
with the application, vessel titling and these amounts will impact your monthly
the loan closing. expenses.
Other dealers may not have a finance In addition to your income, the lender
specialist on their staff, but they may may also look at your overall net worth.
employ an outside loan service company Why? Your net worth may be considered for
that handles all the same tasks, and it stability and as a secondary source of
will arrange all of the details, or repayment should you lose your job.
simply send you to a bank or financial Things to Consider:
service company they refer business to, The Down Payment: The down payment is
to have them handle the transaction. based on the age, type and price of the
Should you work with a lender directly, boat you are buying, as well as your own
or go through the boat dealer or broker? credit profile. Typically, marine lenders
Dealers usually have established offer financing with down payments in the
relationships with several finance 10-20 percent range. Manufacturers and
sources. They also have access to dealers may offer a special program that
extended warranty programs that can be could allow you to qualify for less on
included in your financing. Because of anew boat.
their relationship with boat Longer Financing Terms: Very often, a
manufacturers, dealers may have special marine lender will offer longer financing
finance programs on certain brands or terms, which are more attractive than
models. Such programs might include those offered by lenders not actively
delayed first payment, no interest for making boat loans.
several months, or lower rates for a Lower Monthly Payments: Because boats
limited time. have longer life cycles than cars, a
Choosing a Loan

 marine lender usually extends longer
If you believe that financing a boat is terms on boat loans-which means monthly
like financing a car, think again. Much payments are likely to be much lower than
like real estate loans, several types of you had expected.
loans are available to finance your boat. More Electronics and Extras: In addition
Simple Interest Loans are the most to financing your boat, a marine lender
common, simplest, and generally will allow you to finance optional
considered most favorable. This equipment, electronics, extended service
fixed-rate and fixed term simple interest plans and life/disability insurance
loan maintains the same monthly payment coverage. By financing everything with
for the life of the loan. At the end of one loan, buyers can usually afford a
the loan, the borrower has paid off all newer, larger, or more powerful boat and
interest and principal obligations. all the gear that it takes to make
Variable Rate Loans have interest rates boating safer and more enjoyable!
that float based on different interest Sales and Personal Property Taxes:
rate indexes, such as the "prime" rate, Although this varies by state, most new
or LIBOR rate. Variable rate loans often boat sales are subject to sales and or
offer low introductory interest rates, property taxes; used boat sales may also
which can change daily, or at some preset be taxed in entirety or by varying
point in the future, usually months or methods. Lenders will require proof of
years. Make sure you look at the payment of sales tax to finalize any loan
adjustable period and other details to process.
clearly understand how payments could Is Your Boat "Loan Worthy?"
change and anticipate how to manage them. A qualified marine lender want to make
sure you're getting your money's worth
Balloon Payment Loans require borrowers with your new boat. The lender will
to pay the entire balance at the end of a research the market value of your boat
stated term. Some borrowers choose this through price guides, comparable boats on
type of loan, since they know they will the market, and discussions with dealers
only own a boat for a certain period, say or yacht brokers about the boat. In
three years, and prepare to pay off the addition, a marine survey by a
loan at that time. 

 professional marine surveyor is often
Regardless of the type of loan, lenders required. All this is done to verify that
are required to explain the complete the selling price reflects a realistic
details of any type of loan provided. market value of the vessel, and that the
Make sure you ask questions about the lender is comfortable with the
different types and choose the one that loan-to-value calculation.
best suits your financial profile. Loan Closing and Funding
Applying for Your Loan

 Congratulations! Your loan has been
Here's a simple rule of thumb: The more approved, and all that's left is the
you want to borrow, the more details closing. As in real estate lending, this
you'll need to provide. Depending on how session deals with the paperwork and
much you want to borrow, some lenders signatures. The dealer, lender or
will require a full written application, financial service company will guide you
while others will take the application through the process smoothly and
over the phone. professionally. Twenty or thirty minutes
The boat loan decision process is quite of review are what it usually takes
simple and straightforward. There are two before you take delivery of the boat.
major aspects that are examined: You and






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