Best Boat-Loan Options

So, you’re going to do it: Take the plunge and buy the new boat of your dreams. You’ve cruised boat shows, visited dealerships and scoured the internet to find the perfect rig for your lifestyle and budget. After having countless conversations, scanning boat tests and brochures to compare specifications, and poking around in lockers and peeking into cabins, you’ve found “it”—the best boat for you and your family.

Now you need to answer a question that is equally important, particularly in these challenging economic conditions: What is the best way to pay for it?

Finding the right answer to this question could be even more challenging in today’s environment of rising inflation and interest rates, not to mention the added wrinkle that many eager wannabe boaters are sitting on lengthy waitlists for boats to be built and delivered.

Still, the main financing channels are fairly common, albeit with a few twists. Most boats are financed in one of three ways: financing arranged through a boat dealer or manufacturer, a home-equity loan or line of credit arranged through a bank or credit union, or a specifically designed consumer boat loan arranged with a bank, credit union or other lender that specializes in marine financing.

We’ve spoken with some experts in the field of marine lending to get the latest intel on popular financing options. We’ve also identified four different types of boat-buying personalities most likely to take advantage of these channels to finance their future fun. You just might see a little bit of yourself in one (or more) of these characters.

Dealer Dan

“If it’s not broke, why fix it?” is this guy’s motto. A traditionalist to the end, he’s eager to sit down with the boat dealer and hash out a financing plan for that new boat he’s been lusting for. Why not? It’s still a tried-and-true option for a wide variety of boat shoppers.

Boat dealers have access to their own financing partners, as well as those from the various boat and motor manufacturers they represent. They work with boat loans every day and are well-versed in the nuances of getting the deal done quickly and easily. Of course, they have a profit motive in getting the deal done through them. They are also motivated to find a financing structure that works with your credit score, boat-buying budget and available down payment. They want a customer who will be satisfied over the long run and rely on the dealer for years of service, accessories and lifestyle purchases. Their motivation to seal the deal and the available funding resources and daily experience they have with boat loans can make them the best option for many boat shoppers.

For example, a recently announced partnership between Sportsman Boats and Yamaha Financial Services illustrates the advantages of this option. “We’re the only independent boat brand to offer captive financing through Yamaha Financial Services,” says Victor Gonzalez, Sportsman Boats’ director of marketing. “This means our dealers have many retail financing options at their disposal to help customers find a way into the right boat for them.”

According to Gonzalez, this also gives Sportsman the ability to develop and promote programs such as delayed payments or “buying down” interest rates if needed to help dealers move boats. This may not be a critical need in today’s market where, as Gonzalez reports, 80 to 90 percent of Sportsman boats leave the factory floor pre-sold. Still, these conditions aren’t going to last forever, and forward-thinking builders like Sportsman want to give their dealers ways to keep the sales momentum going in the future.

Tommy Trust Fund

OK, this guy doesn’t really have to worry about financing his boat purchases. Being born into generational wealth means he can pull money out of his bank account anytime to buy his dream boat—you know, the one most people only fantasize about.

But just because he has the financial wherewithal to plunk down a briefcase of Benjamins for a new boat, is it always the smart idea That depends, according to John Haymond, senior vice president for Medallion Bank and president of the National Marine Lenders Association. “It really depends on your individual financial situation and the specifics of your boat purchase,” Haymond says. “It’s never a bad idea to maintain cash in reserve, especially in volatile economic conditions. It could also be wise to put less money down or stretch out payments in the structuring of your financing, particularly as investment rates move higher.”

Mr. Homer Equity

The majority of us don’t have limitless funds. Many people, however, do have access to a considerable amount of money through the equity in their homes. This money can be tapped by refinancing a cash-out mortgage, taking a second mortgage, or setting up a home-equity loan or credit line.

There can be advantages to this route, beginning with the fact that interest rates on these loans often are lower than nonsecured consumer loans. Depending on the specifics of your situation, there could also be tax advantages for the interest paid on the loan. Home-equity loans can also be structured in a variety of ways, including some long-term options that allow you to stretch out repayment.

Depending on your situation, taking money out of your house could put you in the category of a cash buyer. Not exactly like Mr. Trust Fund, because you still have a loan to repay, but it gives you options to pay all at once, or pay a large down payment and the rest over time on a traditional boat loan. And approaching a dealer with cash makes your negotiating position stronger.

There are risks to going this route. Your credit availability is subject to personal economic conditions and your regional real estate market. Generally, it’s also a more complex process because the lender will need to examine your income and your home’s market value and loan-to-value ratio. You might need to get a home appraisal done as well. Depending on the bank or lender, there can be closing costs attached.

Home equity is a wonderful thing, but it’s also something that evaporates quickly as the economy and personal situations change. Combining new boat lust with a seemingly vast source of money—cash you feel already belongs to you—could be a recipe for bad decisions.

Read Next: How to Buy a Boat in a Boom Market

Web-Master Wally

This guy actually relishes the process of diving into various financing options and researching all the ins and outs for himself. Wally wouldn’t entrust anybody else with the task of comparing the financing options from different banks and lenders to see how much he qualifies for, and how to structure a down payment and payment plan that suit his needs.

Wally doesn’t have to be a financial wizard either, as long as he turns to trustworthy sources. The National Marine Lenders Association is an organization of banks, loan origination companies, finance companies, credit unions and other industry professionals specializing in boat loans. While its primary purpose is to educate current and prospective lenders in marine financing procedures and promote marine lending within the industry, it can also be a valuable source of information for consumers. “Many national and regional financial institutions are NMLA members,” Haymond says. Its member banks and finance companies emphasize marine lending and can offer consumers the benefit of their experience in setting up boat loans for people from all walks of life.

The NMLA website (marinelenders.org) is an excellent source of information and advice for those researching boat-loan options. A “For Boat Buyers” section of the site provides resources, like a member’s directory, boat-loan basics, tax deductibility information, a loan calculator and more.

“There has been a shift over the last six to eight years for consumers to finance online with a bank or credit union,” Haymond says. “It is more convenient and efficient for consumers to shop multiple finance sources for marine loans from their home than the sometimes limited options at a dealership. Today, people are accustomed to shopping online, even for big-ticket items like boats, and then quickly flip over to financial marine sources to arrange financing in the comforts of their home.”

Google “boat loans” and your search engine will be swamped with links and ads for traditional banks, online banks, loan brokers and more, all promising quick and easy boat funding. For those willing to do the homework, there has never been so many different options to secure financing.

Sealing the Deal

This competition for your business and the wide range of lending choices are good things because they leave the boat buyer with more options for financing than ever before. Wading through it all might seem daunting. But if you’re a motivated and resourceful buyer, you’ll find a way to pursue—and fund—your passion.

What About the Engine?

Rising interest rates, higher boat prices and lack of inventory have led more people to hold on to their old boats and consider repowering to make their current boat new again. Thanks to the increasing interest, the repower demand—especially for outboard dealers handling popular brands like Mercury, Yamaha, Suzuki and Honda—is stronger than ever.

These engine companies, however, are also faced with production and supply-chain issues. “Loose motors” (a term used for new engines sold to the repower market) are especially hard to come by because motor manufacturers are working hard to supply OEM boatbuilder partners, who are working hard to catch up with their backlog of pre-sold boats.

Even in this environment, financing is available to fund the purchase of today’s high-powered outboard engines, which easily run from $40,000 to over six figures, depending on the size and horsepower. Buyers can avail themselves of the same channels used to fund new-boat purchases. There are also specific repower financing programs offered by engine manufacturers through their authorized dealers. One example is Mercury Repower Financing, which offers financing programs for both outboard (and sterndrive and inboard repowers) from $5,000 to $50,000.

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