It’s high season for shopping for a loan to finance a recreational boat purchase, according Boat Owners Association of The United States (BoatUS). The nation’s largest advocacy, services and safety group urges boaters to be smart consumers when it comes to financing a new or used boat and offers three tips to help you avoid common problems when applying for a loan.
“Boat buyers can help themselves by knowing three key things: how loan rates work, how much of a boat loan you can afford, and your credit score,” said BoatUS Boat Finance Department Manager Rache’ Llerena. “We see these same three mistakes every day. Educating yourself and being candid about the numbers make you a wise consumer and may put you in stronger position when seeking a boat loan.”
Here’s what you should find out before you apply for a boat loan:
- Know how boat loan rates work. Fixed-rate, fixed-term, simple-interest loans are the most common. They have the same monthly payment for the life of the loan, typically from 10 to 20 years. Down payments from 10% to 20% are the norm. Generally, interest rates are lower and loan terms are longer for newer boats and larger loan amounts. However, each are dependent on a variety of factors including model year, loan amount and down payment. Be prepared for lenders to require larger down payments, charge higher rates and offer shorter terms on older boats, especially those over 20 model years. There could also be a rate difference between some consecutive model years, so talk with your lender to better understand the rate and term structure.
- Know how much you can afford. Estimate your monthly payments using the BoatUS online boat loan calculator. This tool is a good starting point in figuring what is affordable, but remember your lender will look at your debt-to-income ratio and other criteria, which may change the amount.
- Be an open book with your credit report. The closer the score to 700 or higher, the better the chances you’ll be approved. So before you apply for a loan, ensure your credit report is accurate. That goes for both applicants if two people (siblings, spouses, business partners or friends) are buying a boat together. While you can get free copies of your credit report from all three national credit bureaus at annualcreditreport.com (the only site authorized by federal law), for your credit score you’re going to have to go to your bank or financial institution. Additional options are to buy it from all three credit bureaus individually or through an online service. Also note that depending on the bank, a credit report ding like a past bankruptcy or foreclosure may not preclude you from getting a loan. More information is available at the Consumer Financial Protection Bureau.
For more information on boat loans or to apply for one, go to BoatUS.com/Loan.