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| Lakeland Financing Guide |
You've been to the shows, compared stateroom layouts and now you're ready to buy that dream boat. You'll want to have your boat loan plan firmly in place, though. Compare rates and terms offered by several loan sources to determine what financing is best suited to your needs.
Banks
Many banks offer boat loans directly to their customers. Start with your own bank and check to see if they finance boat purchases. Inquire about rates and how long a loan term is available for the boat you are considering.
Financial service companies
These maintain relationships with local, regional and national lenders, giving them broad access to finance programs. They are experts in the marine lending field. Call for rates and terms and get an idea of anticipated application turnaround and funding time.
Credit unions
If you are a member of a credit union that makes boat loans, be sure to contact them. They usually have attractive rates for members. If they have marine lending specialists on staff, they should be able to offer a competitive loan.
Choosing the loan
The simplest, most common and generally most favorable option is a fixed-rate, fixed-term simple interest loan. This maintains the same monthly payment for the life of the loan. At the end of the loan, the borrower has paid off all of the interest and principal obligations.
Variable rate loans have interest rates that float based on different interest rate indexes, such as the ?prime? rate. They often offer low introductory rates but can change yearly, monthly or even daily. Look at the adjustable period to clearly understand how payments could fluctuate.
Balloon payment loans require borrowers to pay the entire balance at the end of a stated term. Some borrowers choose these because they know they will only own a boat for a certain amount of time and can prepare to pay off the loan then.
If you?re buying a boat from a dealer, you will likely get a helping hand with the loan process. Many dealers have a finance manager on staff who can handle the whole transaction. Others might employ an outside loan service company that will arrange all of the details. Some dealers may simply refer you to a bank or financial service company.
Financing your boat through a dealer has advantages. They usually have established relationships with several finance sources and have access to extended warranty programs. They also might have special finance programs on certain brands or models because of their relationship with manufacturers?delayed first payment, no interest for several months or lower rates for a limited time.
Applying
Some lenders will require a full written application while others will take the application over the phone. This primarily depends upon the boat loan amount?the more you want to borrow, the more details need to be provided. It?s important to provide complete information to help facilitate the process. When income verification is required, depending on the size of the loan request, you will probably be asked to provide copies of tax returns for the past two years. You may also be asked to prepare a personal financial statement of your assets and liabilities to show your net worth.
Have all of the boat information available. The total cost will include the purchase price, equipment upgrades or additional accessories you may be considering, sales taxes that must be paid at the time of purchase, and registration, title or documentation expenses.
Getting approved
The boat loan decision process is quite straightforward. There are two major aspects that are examined: you and the boat. Your credit history will be reviewed for continuity and satisfactory repayment of present and past credit obligations, looking for loan amounts comparable to your request.
Another important factor is debt-to-income ratio. The lender will look at present monthly obligations and add the monthly payment for the boat loan (they also may add presumed operating and maintenance costs) to determine your monthly debt. This is compared with current income, and your net worth could be considered for stability and as a secondary source of repayment.
When it comes to the boat, the lender will verify that the selling price reflects a realistic market value, that your down payment meets their guidelines and is in line with your credit profile, and that they are comfortable with the loan-to-value calculation. Other factors come into play, such as the type and age of the boat you are buying.
The lender will research the market value of your boat through various sources that include price guides, comparable boats on the market, and discussions with dealers or yacht brokers about the boat. A professional marine survey is often required.
Closing
The dealer, lender or financial service company will guide you through the process. Twenty or 30 minutes of review are what it usually takes before you take delivery of the boat.
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