Demystifying Boat Loans
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. Market Value 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. Bank Catch 22 Sometimes banks say they are "interested in yacht lending" but they are really only interested in finding that "one in a hundred golden borrower"... so you waste your time filling out forms only to be rejected if you don’t have 110% perfect credit. Have a current copy of you tax return to fax them for a quick verbal approval before proceeding. Avoid Stamp Fees For those who live in Florida keep in mind if you are traveling, sign your loan documents out of the state of Florida to avoid paying "State Document Stamp Fees" If you sign your loan paperwork in Florida you will pay a state fee of $3.50 per $1000 of the loan amount. Lender Pre-Approval Loan interest payments are deductible as "second home mortgage interest expenses" unless you already take this deduction on a second home. Seller Financing Concerning "seller financing"… It may be possible in a very few, very rare cases like with some "501- c(3)" charities. But you will need 40% down and are severely limited to only the boats they have taken in as donations (it will NOT be your dreamboat). Ask your broker what is available here. Because yachts can be easily moved out of the country, 99.9% of all sellers will not agree to seller financing. Factor in Foreign Exchange Rates Foreign currency exchange rates can have a substantial impact on the price of yachts. You should be aware of how this can affect prices. In recent memory, the Euro was trading at .88 to the dollar; that is, one US dollar would buy .88 Euros. Now the Euro costs 1.26 dollars. So a yacht priced at 200,000 Euros used to cost $176,000 but now costs $252,000 (with a 1.26 rate)! As you can now see, the dollar has really weakened against the Euro. So, Americans won’t be buying many European owned yachts as long as the dollar remains weak. Foreign exchange traders say this is happening because Arab oil producers are afraid to hold dollars for political reasons and they are now demanding Euros in payment for crude oil. Also, the Arabs have dumped billions of dollars in savings and bought Euros and Euro-denominated investments instead. So, the Euro is becoming the "currency of the world" and this trend will probably continue. On the other hand, if you have Euros, you should be buying yachts owned by Americans and take them back to Europe for re-sale. Dollar-denominated yachts are cheap for Europeans now. Vendors Keep in mind the best way to attain the boat and loan you desire is through extensive research. The more you know the easier it will be to navigate through the obstacles that will come your way during this process. Below is a list of vendors to give you a head-start in your search. Offshore Financial is known for its reputation for being an industry leader in marine financing. Your personal contact, Jennifer Moore, will work hard to offer you the most competitive rates and terms, regardless if you have your eyes on a private Day-sailor or a Megayacht. Let her assist you in making your cruising dreams an affordable reality! New Coast Financial - Let Cindy Lewis of NewCoast Financial guide you through all of the options that are open to you with regards to marine financing. She is highly qualified to answer any questions you may have and help make your loan process hassle free. She is committed to ensuring that your loan is placed with a bank that best fits your financial needs. Financial Underwriters Network specializes in boat financing nationwide, we offer competitive rates and a variety of loan programs to best suit your individual needs. Complete our on-line loan application today, or call our office (800) 231-4003 24/7 personal assistance available to take an application over the phone. Beacon Credit Services offers an on-line application with instant approval along with fixed, adjustable and variable rate loans up to 20 years with no application fees. Refinance upto 100% of the value of your boat. Foreign Flag (U.S. Citizens only) and Letters of Credit. Minimum loan is $20,000.
Russo Marine Financial Services, Inc. a subsidiary of Russo Marine, can assist you with financing or refinancing new and pre-owned power and sail boats purchased from dealers, brokers or private parties. BoatLoanSuperStore.com (minimum loan $20,000) is one of the preferred lenders among Yacht dealers and brokers, they offer several experienced lenders offering convenient rates and terms, serving the continental United States. They are a full service marine lender, offering loans for Power Boats, Sail Boats, House Boats, and High Performance Boats. They also provide USCG Documentation, State Registration and Extended Service Programs for New and Used boats. Serving the industry for over a decade, applications are normally approved in 6 hours or less!* SourceOne Federal Credit Union - Minnesota Residents Only - Great long term and low rate Boat and RV loans. No application fee. Delivering Personalized Financial Services & Products for over 70 years. SeaDream Boat Loans and Boat Insurance is the premiere West Coast brokerage for boat loans and boat insurance. Their goal is to help you achieve your nautical dreams by providing you with the best service for your boat financing and insurance needs. Excel Credit - they will help you secure your boat loan with financing from $25,000 to Ten Million Dollars. In most southern states, we can arrange loans from $10,000. We offer terms up to 20 years. Essex Credit is America's leader in pleasure craft financing and offers boat loans with the lowest rates and the best terms available. With eight regional offices located in major boating areas, they offer personalized and efficient service from the initial application to the post closing paperwork. Oak Hill Financial specializes in financing and refinancing new and used boats and yachts of all sizes. With an Oak Hill Financial loan you can expect no points, no prepayment penalties, terms to 20 years, simple interest, fixed rates, Coast Guard documentation and personal service. We fulfill loans for clients across the U.S. For more information, please visit www.catamarans.com.
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