Boat Loan Basics

Recently I was honored to conduct an interview with the vice president of one of the largest marine lenders in the country. In it she shared important things that boat buyers need to know before taking on marine financing on a boat purchase. Because she revealed so much insider information, she prefers to remain anonymous, so I won’t share her name with you here. We are just grateful that she shared all the insider information that she did! If you have need of further assistance, Brad is available to put together a ‘Custom Boat Loan Report’ at your request. You can reach him at (904) 644-7631 or email Brad@YMCJax.com.

1. What types of things should boat buyers look for when researching marine boat loans?

A buyer should look for a loan that is simple interest (you only pay interest for the days that you have the money extended) and that has no prepayment penalty. Looking for competitive rates and terms with down payments around 10% to 20% should also be a priority.

2. Some people think marine boat loans and car loans are similar. Can you tell my members some of the major differences between the two and why that matters? 

A “boat” or “yacht” is considered a luxury item, so the qualifications can be stricter. When considering lending money to an individual for the purchase of a boat or yacht, the lender will look at the person’s net worth and liquid assets, as well as credit history and his/her ability to make payments. Each lender has a different appetite, and that is where working with the right person or business can save a lot of time for a client, versus the client searching each bank themselves.

With larger boat and yacht purchases, the way a client takes ownership can be different, as well. Where a car is titled through the individual state where it will be used, that’s not the case with larger boats and yachts. With these assets – if they cost $100K to $250K – the title is filed on a federal level with a mortgage. (So, it’s really more like purchasing a home.)

Let’s look at an example of a marine boat loan versus a car loan:

• A $50,000 auto loan at 2.99% will typically have a payment around $760/month
• A $50,000 boat loan would have a monthly amount of only $385/month

*Rates and terms will vary depending on the buyer’s credit history, upfront investment and age of the boat. You can expect a boat loan payment to be around half that of an auto loan.

3. Many of my clients are self-employed or earn a large portion of their income from commissions or bonuses. What should they expect during the process when setting up their financing? 

 Typically, the financial institution will use a 2-year average of the individual’s gross income. With regard to being self-employed, different banks underwrite different ways. This is why working with the right company can be helpful; they will know which bank best fits a client’s needs based on the individual’s tax return and how they report their income.

4. You mentioned in a previous conversation that sometimes you can help finance those seeking to purchase a new boat when a regular bank or credit union has declined their request for a loan. How are you able to do that? 

 A lot of banks don’t have an appetite for marine boat loans. They don’t understand the product. Sometimes they offer such short terms and high rates that the debt ratio skyrockets. Some traditional lending institutions offer terms of 15 and 20 years, and the rates are more competitive than almost any branch of a bank. As I mentioned previously, different banks cashflow clients differently. What doesn’t make sense to one lender may be no problem to another lender. That’s where using an experienced and knowledgeable lender can save you time, hassle and money when financing a boat purchase.

If you are interested in a personalized ‘Custom Boat Loan Report’ call Brad at (904) 644-7631 or email Brad@YMCJax.com.