It's everything you've ever dreamed about and more, and you simply have to have it. We're talking about your first boat. Unfortunately, though, it will cost a lot more than you have on hand, so you'll need to finance it. The first thing on your mind is where you can get a loan. Undoubtedly, if you live in a place where boats are popular, you'll have little trouble finding a source for the money. But if you don't, where should you go?
Sources of Boat Loans
Most financial institutions make boat loans, same as they do automobile loans. And if they are members of the National Marine Bankers Association, all the better, because they are up to speed on how to do it. First, call your bank or credit union to see if it makes boat loans. Ask what interest rate it charges and how long the loan will be for the size of boat you are considering. Don't overlook asking your dealer because, often, he will have sources of loans and will make the process a lot easier.
Three Types of Loans
The one most popular is the fixed-rate loan. It calls for the same monthly payments for the duration of the loan, and you'll own the boat, free and clear, at the end of the loan. The second type is one with a variable rate. Often this type of loan has a very low rate at the beginning, but then it will be priced at the going rate. A variable rate can change frequently, so you need to be prepared to pay higher monthly payments. The third is a loan with a balloon payment. Meant for people who plan to trade in their boats within a couple of years, a balloon loan requires only interest payments monthly, but all of the principal will be due at the end. You need to have an excellent credit rating to qualify for a balloon loan.
Making Application
Just like auto loans, some lenders will transact the loan over the telephone and require no written application. Generally, though, the larger the loan amount, the more the lender will require. Be prepared to provide the lender with copies of your last two tax returns, a financial statement and approval for them to check your credit report with one or all three of the bureaus. Finally, you will need to provide details about the boat you plan to purchase, including the price, model, age and power.
Possible Tax Deduction
Generally, the interest on your residence can be taken as a deduction for both federal and state income taxes. You can also deduct the interest on a second residence, and your new boat may qualify as such if it has certain properties. If it has a kitchen and a place to eat as well as sleeping quarters, it may qualify. Also, if you use the proceeds of as home equity loan, it will also qualify for the deduction as long as you stay within the $100,000 limit.
Timing
Unlike a mortgage loan that may take 30-45 days to complete, a boat loan can be completed in a day. Generally, a lender needs about a half hour to review the documents before making you a loan and sending you on your way with the purchase of your dreams.
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