Whether you choose to explore the turquoise blue waters of the Caribbean, the lakes in your own hometown, or want to island hop around Europe, you know that you want a boat to call your very own! A vessel to take your friends and family out on and celebrate achievements and milestones, and fill up your memory bank. However, before you turn those boating dreams into a reality, you need to buy the boat. And just like with any major purchases, you need to figure out how you plan on paying for a boat. It’s usually the second largest purchase you will ever make, after your home.
- Understanding Boat Loans
- Marine Finance Leaders: Expertise, Experience & Transparency
- Online Boat Loan & Financing Tools
- How Market Conditions Impact Boat Loan Rates
- Credit Score Considerations
- Conclusion
- FAQs: Frequently Asked Questions
Above: Two men discussing the financial market and its effect on marine financing at a marina. Photo via Pond5.
Understanding Boat Loans
Many boat buyers decide to take out a boat loan to help with their purchase or upgrade. This gives you more flexibility with your own money because you’re not spending all of your hard earned savings on a boat. You can keep your money, invest it and make more or use it to start a business or pay for college or whatever you need to do.
Instead of using your own capital, you’re putting down a down payment and financing the remainder with a marine lender. Down payments may be as little as zero down or may be as much as 30% or more of the purchase price. It depends on a number of factors including your credit score, the lender’s requirements, and the size of the loan.
For example, you may want to finance a $150,000 boat. Instead of paying the entire $150,000 up front, you may get approved for a down payment of 10% which is $15,000. The remaining $135,000 will be the amount of your loan and this will be paid back over the loan term which can range anywhere from a couple of years to seven or even ten years. And a boat loan term of twenty years is possible with larger loan amounts. For example, if you purchase a $1.5 or $2 million yacht, you may qualify for a 20 year boat loan term. This is designed to make it more affordable to purchase a more expensive boat because you have more time to pay back the loan.
Marine Finance Leaders: Expertise, Experience & Transparency
Boat Trader has been in the marine industry for decades with a network of thousands of boat dealers and yacht brokers across the country. Plus they also have relationships with more than 15 marine lenders through their partnership with sister company Trident Funding, the biggest lender in the boating world (also owned by Boat Trader parent company Boats Group). This means boat buyers will get the best interest rates and loan terms, all in one place, at a one-stop-shop for boating. You won’t have to rate shop or spend hours comparing rates and loan products from different marine lenders. Boat Trader does all the heavy lifting for you.
Online Boat Loan & Financing Tools
You can use Boat Trader’s free online boat loan calculator to see how much boat you can afford and what your estimated monthly boat loan payment will be. Then you can shop from thousands of classified listings for boats for sale across the country that match your budget, and check their prices against Boat Trader’s Boat Price Checker tool. When budgeting, remember to factor in additional boating costs such as insurance, docking, and storage fees as well. Then you can get pre-qualified and apply for a boat loan online or over the phone. Approvals can be as fast as 24 hours.
Have your identification, social security number, and proof of income and employment ready when applying for a boat loan. A credit check will also be conducted. Typically, you need a 650/700 or higher credit score to qualify for a boat loan. Keep in mind that the higher your score, the more loan products you qualify for and the better interest rate you will get. The better rate you get means the more money you save in interest over the term of the loan.
Boat Trader is the leading boat marketplace with hundreds of thousands of boats for sale. You can browse by location, price range, boat size, and a whole bunch of other criteria including type of engine. If you’re in the market to buy a new or pre-owned vessel, Boat Trader is the place to look. Within a few clicks you can find your dream boat, explore its specifications, and check out photos of it as well. Whether you want to buy a yacht, a small fishing vessel, a cabin cruiser, or a speed boat, Boat Trader has them all.
How Market Conditions Impact Boat Loan Rates
Now that you know how boat loans work, how to apply, and where to find your dream boat, let’s dive into the nitty gritty. How do market conditions impact boat loan rates? And why is this important to know?
You can control your finances and your credit score but unfortunately you can’t control what’s going on in the market and in the world overall. Things like a pandemic, a war, a new President being elected, and a major storm, may all impact interest rates including boat loan rates. The stock market is heavily tied to interest rates as well. Ultimately, we are a global economy, so things happening across the world still impact us.
Economic Slowdowns & Loan Rates
If a recession is going on or there is a lot of economic uncertainty, overall rates tend to be lower. These low rates are set low to deliberately encourage spending and hopefully stimulate the economy into upward growth. Lower rates encourage more consumers to buy now while the rates are this low. So, for boat loan rates, you may start browsing boats that you didn’t previously think you could afford. Or, you may want to buy a boat when you had never considered it possible before.
The opposite is true as well. If there is already strong economic growth and the economy is booming, then rates typically tend to be on the higher side. These higher rates are designed to help hedge against prices getting too high and are designed to prevent inflation. If boat loan rates are high, it may discourage borrowers from buying boats to begin with or they may lower their budget to accommodate for the higher rates.
Inflation Vs. Interest Rates
Inflation is a big keyword lately, and inflation also impacts boat loan interest rates. When inflation is high, rates are often raised to discourage purchasing. If less people are buying, then prices shouldn’t be rising as fast; at least that’s the theory. So, if boat loan rates are high, some borrowers will decide they can’t afford to buy a boat right now and others will decide they want to wait to get a lower rate. This is designed to lower the overall prices of boats and help with over inflation.
Supply & Demand
Supply and demand affects rates as well. If there is a surplus of available boats, rates may be cut to encourage borrowers to buy buy buy. Conversely, if buyers are buying at record rates and there isn’t enough inventory, and you may have waiting lists for some boats, then rates may go up to reflect these conditions.
Consumer Confidence
Consumer confidence ratings impact boat loan rates too. If consumer confidence is high overall, then this increases spending and borrowing which in turn impact rates; generally raising them. However, if consumer confidence is low due to uncertainty or any reason, then rates tend to fall which encourage consumer spending to go back up. It’s basically a balancing act.
Why this matters for you as a borrower: Well, your interest rate will determine not just how much your monthly boat loan payment is but it will also determine how much money you spend over the life of the loan. The lower your rate, the more money you keep in your pocket. And a lower rate can save you thousands or even hundreds of thousands of dollars over the term of your loan.
Credit Score Considerations
In addition to market conditions, boat loan rates are also impacted by the borrower’s credit score and overall financial profile. Your rate will be lower, the higher your credit score. And conversely, if you have a lower credit score, let’s say it’s in the mid 600s, expect your rate to be higher than the advertised rate and higher than rates offered to borrowers with higher credit scores. Additionally, the length of your boat loan term, the loan amount, and the age of the boat may also impact your boat loan rate.
The Wrap Up: Understanding How Market Conditions Impact Boat Loan Rates
Conclusion
Now you know a bit more about why market conditions matter and how they impact boat loan rates. You know that there is a cause and effect for everything. You know that economic uncertainty often decreases rates to encourage spending and you know that rates are raised in order to slow down spending, rising costs, and ultimately to prevent inflation from getting out of control.
It’s important to know how boat loan rates are affected by market conditions but also keep in mind that your best bet is to just worry about the things you have control over like your credit score and your personal finances.
Boating is a great pastime because it gets you outdoors in the fresh air, encourages leisure time, and is an awesome way to destress. You can also explore new hobbies you enjoy through the salty life. Maybe you take up fishing, wakeboarding, water skiing, or you realize chasing sunsets from the bow is more your speed. So when you’re ready to change your life and get out on the water, choose Boat Trader.
FAQs: Frequently Asked Questions
What factors affect boat loan rates?
The main factors that affect boat loan rates are market conditions and the economy, the borrower’s credit score and overall financial profile, the down payment, the loan term, the age of the boat, and the amount of the loan.
Why are boat loan rates generally higher than home mortgage rates?
Boat loan rates vary based on a number of factors, as we mentioned before, and are especially dependent on the borrower’s credit score. However, boat loan rates as a whole tend to be a bit higher than home loan rates. This is because a boat is considered a luxury purchase and not a necessity. Lenders want to ensure the borrower can afford to purchase and keep their boat. Lenders also generally assume that if the borrower falls on hard times, they will try to keep their home first and may stop paying their boat loan. So, the rates can help protect lenders from higher risk borrowers.
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