10 Things to Do Before Getting a Boat Loan

10 Steps to Take Before Taking Out a Loan for a Boat

If you’re looking to buy a boat and you don’t have enough cash on hand to complete the transaction, you may consider taking out a loan. This is an advantageous financial move for a variety of reasons; you’ll immediately get more buying power, you’ll take advantage of low interest rate debt, and you’ll have more financial flexibility as well.

But before you make a final decision on your boat loan, there are some steps you’ll need to take and items you’ll need to prepare. The more work you do in advance, the better position you’ll be in eventually.

What to Do Before Getting a Boat Loan

These are some of the most important steps to take before getting your boat loan:

  1. Work on improving your credit score. As early as possible, take a look at your credit score and improve it, if necessary. Most lenders will prefer to give loans to people with a credit score in “good” territory, at least 700. If you have a lower credit score, you may have trouble getting financing, or you may face a higher interest rate. There are several steps you can take to improve your credit score, including paying off your debts, making payments on time, and avoiding opening new loans or lines of credit. However, it will take some time for your credit score to increase – which is why it’s important to start early.
  2. Establish your budget. With your credit score more or less under control, you can start establishing your budget. How much boat can you truly afford? Take inventory of your income from all sources and outline your current expenses. How much extra money do you have each month to dedicate to a boat payment? Keep in mind that you’ll also be responsible for extra expenses, such as fuel, insurance, and docking costs. You don’t want to buy more boat than you can afford.
  3. Run the numbers. Using a loan calculator, figure out how much your boat payments would be under a variety of different conditions. If you buy a £50,000 boat and make a £10,000 down payment, you’ll have a loan of £40,000. What happens if you face a 3 percent interest rate for 20 years? A 4 percent rate for 10 years? When you get more specific information from a lender, you can be more precise with these calculations, but it pays to have a good idea at the start.
  4. Save up a down payment. Next, you’ll want to save up a down payment for your loan. Some lenders may allow you to buy a boat with no money down, but for the most part, you’ll need a down payment of 10 to 20 percent. A bigger down payment will reduce the amount you borrow, and by extension, your monthly payments. However, a smaller down payment may put less short-term financial strain on you. Make the decision that’s right for your specific financial situation.
  5. Review your purchasing options. At this point, you’ll be ready to start reviewing your purchasing options. You’ll have a good idea of what price you can afford for a boat and what your monthly payments will be. You’ll also have a down payment set aside – so you can move forward when you find a vessel that works for you. This is the most fun part of the process, so take your time and review a number of different boats.
  6. Familiarize yourself with loan options. There isn’t a one-size-fits-all “boat loan.” You’ll find that terms vary by lender, and even within the same lender, you may have many different options. You’ll likely get to choose the length of the loan, the down payment, and a number of other variables; you may also be at the mercy of specific terms and conditions, and you won’t have direct control over the interest rate. The more knowledgeable you are in this area, the more intelligently you can shop.
  7. Shop with multiple lenders. Make sure to shop with multiple lenders so you can distinguish between good offers and inferior ones. If you’re comparing terms apples to apples, you can likely figure out that one lender is strictly better than the others. Between boat dealers, banks, and marine financing specialists, you should be able to find an offer that stands above the rest.
  8. Consider what you want to roll in. Depending on the lender and the type of boat you’re buying, you may be able to “roll in” certain other expenses. For example, when you purchase a new boat, you may be able to add in a number of electronic devices and add their cost to the total you’re borrowing. This can give you access to things you might otherwise not be able to afford.
  9. Prepare your paperwork. If you’re almost ready to move forward with the loan, you can start preparing your paperwork. Depending on the lender you’re choosing, you may need to provide details on your finances, including past tax returns, proof of income, and past bank statements. It pays to be prepared with this in advance.
  10. Make your final decision. When you’ve taken all the above steps and you have a few loan offers from different lenders, you’ll be in a position to make your final decision. Set your personal priorities, compare these offers directly, and when you find the right boat, you can pull the trigger.

Shopping for a Boat

Even if you’re in the earliest stages of reviewing your loan options, you’re equipped to start looking for your next boat. If you’re taking the decision seriously, it could take you weeks of research, or even longer, to review the models currently available and settle on the vessel that works best for your needs.

One of the best places to start is an online marketplace that features a wide variety of both new and used boats for sale – like TheYachtMarket. Browse our selection of boats for sale and start your boat buying journey today!

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