If you have decided to take a boat loan you need to keep a few points in consideration. First and the foremost thing you need to do is to decide which boat you wish to buy and find out its price, this will help you in determining how much funds do you need. The next thing is to unearth how much money you have to invest in the boat. Both these steps will help you in finding how much money you exactly need to borrow with a boat loan.
There are two types of boat loans available in the loan market – secured and unsecured boat loan. Secured boat loan requires a borrower to put some kind of collateral to become eligible for the loan. Tenants can apply for an unsecured boat loan, which does not require a borrower to put a security against the loan. In the same way, homeowners who wish to protect their home from the risk of repossession too can apply for an unsecured boat loan.
Boat loans are offered at both fixed as well as variable rate. In case of a fixed rate loan, you will have to pay a fixed sum of money every month; this loan option will help you in accommodating your budget each month. On the other hand, in variable rate loan or adjustable rate loan the interest rate fluctuates with market interest rate. This interest rate loan option will allow you to take advantage of the falling market interest rate. At this time, you can expect the lowest rates in recent history. Loans are now amortized over 15-20 years, require 20% minimum down payment and, fixed rates are from 5.5% to 6.75%.
Marine loans generally have no points on the loan. They are all "simple interest" loans with no pre-payment penalty. If you know you will only keep the boat 2-3 years then the "out of pocket" expense is surprisingly low. Many yacht buyers have a three-year "itch cycle". That is, they keep a boat for three years, then they "get the itch" to sell it and try out another boat for three years. If your credit score is less than 600 then the situation may be difficult. Lenders mainly look at the debt to income ratio. Use only marine lenders, as most banks do not understand the yacht lending business and don’t lend for yachts valued over $100K.
If you know your income as shown on your tax returns will be not be at least 200% of your debts then ask for a "no-income verification" loan. Essex does these.
Do take into consideration the various fees associated with the boat loan that sometime results in a low cost seeming loan turning out to be costly. A boat loan may accounts for fees such as underwriting fees, processing fees, cost of credit report, and other related costs. Make sure to consider all the cost involved which will help you in deciding which loan option is best suited to your needs.
When you reach out in the market to find the best boat loan there will be an enormous number of lenders offering you great loan deals. Now, you have to decide whether you want to undergo the lengthy stressful loan process or a fast, easy and cheap loan. The Majority of you will opt for the second option as everyone wishes to save his or her valuable time and money. Online lenders aim to provide you with the comfort of getting a cheap and fast boat loan arranged.
Online loans are easy to apply for. All you do is fill out an online application form with some of your personal and financial information. Lenders will get back to you with the loan deals they find appropriate for you. Don’t accept the very first loan deal you get. Search around, collect loan quotes from lenders and compare them to find the loan deal that you find to be perfect matching your needs and desires to the best.
The Application Process
Some lenders will require a full written application, while others will take the application right over the phone. This primarily depends upon your loan amount – the more you want to borrow, the more details need to be provided. The important thing to remember is to be as complete as possible and you will find the process will move along much more quickly. Include complete name, address, phone numbers, employment details, income as requested, details on home ownership (if applicable) and all monthly debt service.
When income verification is required, depending on the size of your loan request, you will probably be asked to provide copies of your tax returns for the past 2 years. You may also be asked to prepare a personal financial statement, which is simply a snapshot in time of your assets and liabilities and shows your net worth. The information requested is necessary to provide the best loan decision, so your cooperation is a plus.
Have all of the boat information available for the application, such as year, make, model, power, optional equipment and any upgrades. Identify the total cost, which will include
• the purchase price
• any equipment upgrades or additional accessories you may be considering
• any sales taxes that must be paid at the time of purchase
• registration, title, or documentation expenses.
You will be signing your application, which will include your authorization to have the prospective lender or financial service company examine your credit. If you do the application over the phone you will be verbally authorizing the credit review.
The Loan Underwriting Process
The boat loan decision process is, really, quite simple and straightforward. There are two major aspects that are examined; You and The Boat. You:
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. Of particular interest will be the level of revolving debt (credit cards) you have and the limits of your credit cards, expressed as available credit.
Another important factor is debt to income ratio. The lender will look at your present monthly obligations and add the monthly payment for the boat loan (they also may add presumed operating and maintenance costs of the boat) to determine your monthly debt. They will compare this to current income as stated on the credit application or verified in the tax returns. Your net worth may be considered for stability and as a secondary source of repayment.
Many boat buyers are very worried about how their credit report will affect their ability to buy a boat. Most people will not need to worry about the effect of their credit history during the boat financing process.
However, you can be better prepared if you get a copy of your credit report to review before you apply for your boat loan. That way, if there are any errors you can take steps to correct them before you make your application.
If you have had credit problems, be prepared to discuss them honestly with a boat financing professional. Responsible boat loan professionals know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit may be considered satisfactory.
The boat loans industry grades a person’s credit like many other industries. Grades are based on payment history, amount of debt payment, equity position, bankruptcies, credit scores, etc.
The process here is for the lender to be satisfied that the selling price reflects a realistic market value of the vessel, your down payment meets their guidelines and is in line with your credit profile, and they are comfortable with the loan-to-value. 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, discussions with yacht brokers about the boat and what other comparable products are selling for, and a marine survey by a professional with whom the lender is comfortable.