Choosing Marine Finance
It is easy to become confused when choosing marine finance for your new boat. We are often asked common questions on the subject, and provide the following independent advice free of charge.
What should I look for in a marine finance lender?
Your marine finance lender should specialize in boat loans. Lenders are required to understand and appreciate specific related laws, such as possessory interest and mechanic’s liens. You could end up having to pay for mechanics charges and retroactive yard fees without this experience.
What payment options should I look for?
Better lenders offer more than a typical monthly payment plan. Some people may be more comfortable with seasonal payment plans that will allow you to miss consecutive payments a year, the same months every year for the life of the loan. This can be attractive for those with seasonal varations in income, people such as sales workers, retailers, consultants, contractors and others. Those with large annual bonuses, might opt for annual payment plans, to make their repayment inline with their bonuses. This option means that you only make one repayment a year, and can usually delay the first of the payments by a few months to give you some flexibility between the time of the initial payment and when the first payment is due.
Some peoples lifestyle and income work better with smaller, frequent repayments. Biweekly or monthly payment options often work best in these situations.
What is the difference between fixed rate and variable rate loans?
Fixed rate loans have a guaranteed, fixed rate over the life of the loan. This means your monthly payments never change. A fixed rate loan generally charges a slightly higher rate.
Unlike fixed rate loans, adjustable rate loans usually begin with a fixed-rate period (typically 1 or more years) and then fluctuate over the remainder of the loan’s life, within certain parameters. An experienced marine lender will be able to help you determine which type of loan is best suited to your needs.
What fees are associated with the loan?
Investigate closing costs and other loan-related fees. These can include, but aren’t limited to, processing and underwriting fees, appraisal fees, the cost of a credit report, tax service fee, application fee and others.
Are there any prepayment penalties?
Some lenders will penalize you if you repay your loan in less time than originally planned. Check with your lender about these fees, especially if there’s a possibility you may have a large increase in income over the life of your loan.
What financing options can you offer me to make the most of my boat purchase from an investment standpoint?
Did you know that your boat may qualify as a residence for purposes of deducting interest expenses on your tax return? In such instances, some customers choose to finance more of the purchase price of their boat and hold on to their cash for other purposes. Of course, you need to discuss these issues with your tax advisor for specific recommendations. The team of marine loan specialists at KeyBank NA will be able to guide you through a variety of money saving options.
Why do I need a survey done before I buy a used boat?
A professional survey is essential for all used boat sales, and most lenders require one. These surveys can uncover information about the boat’s condition that you may not have known. Getting a professional survey before you buy could save you thousands of dollars down the road. It’s better to be safe than sorry.
Written for Bob Spalding by Jake Gourd. Providers of gear.
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