If you are interested in buying a boat anytime soon, the first question that must pop into your mind is how to afford a boat. Boat financing is not very different from financing a car, a home, or some other major purchase. The next question must be how long can you finance a boat? Various factors like your credit score, down payment size, will affect your loan’s interest rate and monthly payments.
Marine lending institutions are more likely to provide you with a loan instead regular bank or credit union. Agents at Marine lending institutions have proper knowledge about boats and are more likely to understand your purchase, and they are better at surveys than agents at regular banks.
Keep on reading to find an answer to the question: How long can you finance a boat?
Boat Loan Terms
Earlier, lenders provided boat loans for much shorter durations. The reason cited here is that historically, boats were not advanced enough. Various boats required repairs, and after a period of ten years, these boats needed a restoration. Most lenders ensured that the collateral was not devaluing quicker than they were getting paid.
As time has passed, there has been improvement in technology. The boats’ engines have improved and last for a longer duration. These newer boats have begun to retain more and more resale value. The result came out that lenders started to finance boats to a longer extent. Now, you can easily find a lender willing to provide a loan for up to about twenty years.
These longer-duration loans bring down the monthly payments a lot. You can see this difference by calculating monthly payments for a ten-year term, and a twenty-year term through an online boat loan calculator.
How long you finance a boat also massively impacts other variables. Let you double the term of the loan, the lender is likely to charge a much higher interest rate, or a higher amount of down payment is needed. Some other factors that a lender may contemplate while determining the loan’s length are the size of the loan, type of the boat, and if the boat is used, then the age of the boat also matters.
Size of the Loan
Loan size is a chief factor to decide how long the lender will be willing to stretch the loan. The larger the size of the loan, the longer the loan can be financed. Keep in mind that some lenders might have minimum loan amounts for different particular term periods.
If you choose a longer loan term, then the overall cost of the boat will exceed what it would if you choose a short loan term. For some buyers, a small monthly payment is worth more than saving money over a longer duration. It all depends on your view of the purchase.
Type of the Boat
Most modern powerboats are put together in the same category. Lenders treat some types of boats a bit differently. These different kinds of boats are
boats with wooden hulls, high-performance boats, sailboats and powerboats, and multi-hull boats or pontoons.
Age of the Boat
The age of the boat also plays a factor to decide how long can you finance a boat. Usually, if your boat is a newer one, then you can get a loan for a longer extent. Sometimes, lenders deal only for recent boats. Many lenders put a bar on how old a boat can be.
These loan requirements sometimes differ when you are looking for a used boat. Some lenders might set higher loan amounts or different interest rates for boats built prior to a specific year. Marine institutes also lay down multiple guidelines for buying a used boat. Many lenders provide funds for an older boat with the high quality rather than an older boat with a lower standard. This higher value of the boat is because of its high quality, and it will last longer compared to other boats.
Your good or bad credit rating and amount of down payment impact the rate of the loan. While buying an old boat, you may have to provide a few necessary documents like tax records and income statements. If a boat is aged than twenty years, the premium is added to the cost of borrowing, making boats that are twenty-one to thirty years old more expensive to finance.
Expenses for Living on the Boat
Plenty of preparation and organization is needed when you are planning to live on a boat full time. Generally, liveaboards are taken a bit differently from usual boat loans due to various laws regarding residences, homeownership, and homeownership escrow accounts. Some lenders might not even consider a loan in these situations.
To manage your expenses, you must have a stable budget and must adhere to it. Sometimes, depending on your boat’s size, age, and value, boat insurance can be as expensive as house insurance.
Marinas needs an application if you are ready to move aboard permanently. There are some places where liveaboards are not permitted or there are long waiting lists. Slip fees of liveaboards are much higher. If the boat becomes your primary residence, then insurance rates may also rise. There are many checklists to ponder upon before you prepare to live aboard. Make sure to be fully prepared before starting your life aboard.
Do you wish to experience a luxurious boat for a few days? It is better to rent it out with some friends. Splitting costs will provide you with a pleasant experience without putting the burden on your pocket. It will give a clear idea of whether you wish to buy a boat of your own or not.
While financing your own boat, above mentioned were some points to keep in mind. Size, age, quality, type of the boat, all these matter while deciding how long can you finance a boat. Financing a boat is somewhat similar to financing a house, a car, or some other massive purchase.