Boat Loan Basics

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


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

attractive than those offered by lenders not actively
If you believe that financing a boat is like financing amaking boat loans.
car, think again. Much like real estate loans, severalLower Monthly Payments: Because boats have longer
types of loans are available to finance your boat.life cycles than cars, a marine lender usually extends
Simple Interest Loans are the most common, simplest,longer terms on boat loans-which means monthly
and generally considered most favorable. Thispayments are likely to be much lower than you had
fixed-rate and fixed term simple interest loan maintainsexpected.
the same monthly payment for the life of the loan. AtMore Electronics and Extras: In addition to financing
the end of the loan, the borrower has paid off allyour boat, a marine lender will allow you to finance
interest and principal obligations.optional equipment, electronics, extended service plans
Variable Rate Loans have interest rates that floatand life/disability insurance coverage. By financing
based on different interest rate indexes, such as theeverything with one loan, buyers can usually afford a
"prime" rate, or LIBOR rate. Variable rate loans oftennewer, larger, or more powerful boat and all the gear
offer low introductory interest rates, which can changethat it takes to make boating safer and more
daily, or at some preset point in the future, usuallyenjoyable!
months or years. Make sure you look at the adjustableSales and Personal Property Taxes: Although this
period and other details to clearly understand howvaries by state, most new boat sales are subject to
payments could change and anticipate how tosales and or property taxes; used boat sales may also
manage them. 
be taxed in entirety or by varying methods. Lenders
Balloon Payment Loans require borrowers to pay thewill require proof of payment of sales tax to finalize
entire balance at the end of a stated term. Someany loan process.
borrowers choose this type of loan, since they knowIs Your Boat "Loan Worthy?"
they will only own a boat for a certain period, sayA qualified marine lender want to make sure you're
three years, and prepare to pay off the loan at thatgetting your money's worth with your new boat. The
time. 

lender will research the market value of your boat
Regardless of the type of loan, lenders are required tothrough price guides, comparable boats on the market,
explain the complete details of any type of loanand discussions with dealers or yacht brokers about
provided. Make sure you ask questions about thethe boat. In addition, a marine survey by a professional
different types and choose the one that best suitsmarine surveyor is often required. All this is done to
your financial profile.verify that the selling price reflects a realistic market
Applying for Your Loan

value of the vessel, and that the lender is comfortable
Here's a simple rule of thumb: The more you want towith the loan-to-value calculation.
borrow, the more details you'll need to provide.Loan Closing and Funding
Depending on how much you want to borrow, someCongratulations! Your loan has been approved, and all
lenders will require a full written application, while othersthat's left is the closing. As in real estate lending, this
will take the application over the phone.session deals with the paperwork and signatures. The
The boat loan decision process is quite simple anddealer, lender or financial service company will guide
straightforward. There are two major aspects that areyou through the process smoothly and professionally.
examined: You and The Boat. You may be asked toTwenty or thirty minutes of review are what it usually
provide:takes before you take delivery of the boat.
About You: