Getting the Best Boat Loan Interest Rates

Boat loan rates tend to be higher than comparable vehicle loan rates. The reason for this discrepancy is the relatively high number of defaults on boat loans. If a borrower is having difficulty meeting debt obligations, they are more likely to repay a car loan before a boat loan. As a result, you will need to take your time in applying and researching loan options to obtain the lowest boat loan rates that are available.

Differences Among Lenders

There are many different types of lenders offering loans for boats and luxury vehicles. Possible lenders include banks, credit card companies, direct from dealer lenders and luxury financiers. In each scenario, there are ups and downs. Traditional lenders, like banks, often have higher rates than direct from dealer lenders. However, dealer lenders often present less favorable financing terms, requiring larger fees associated with the loan and making the loans less flexible in the future. Obtain sample loan quotes from a few forms of lenders to get an idea of the range of rates available to you. Keep in mind you may compromise on some features of a loan in order to obtain low rates.

Loan Options

Once you have selected a few lenders you would like to discuss loans with in more detail, you will then have to consider options to lower your rates. One option is securing the loan with collateral. In all cases, the boat itself will be used as collateral on the debt. You will not officially own the boat until the debt is paid off. You can have the choice of adding additional collateral, such as another vehicle, to the lien. If you do this, your rates will go down, but your risk levels will go up. Beyond securing the loan with additional collateral, discuss options for large or small down payments and short versus long loans. In general, a large down payment lowers your rates. Along the same lines, opting for a short loan with high monthly payments will result in lower rates.

Boat Options

You can also control rates by selecting a boat that is less expensive to finance. For example, you may think buying a used boat is best because it will be cheaper than a used boat. While this is true in part, it can also be more expensive to insure and finance a used boat. With a used boat, the lender runs the risk of the value of the vehicle decreasing very rapidly during the life of the loan. If you were to default and surrender the boat, it may be worth only a small fraction of the total amount remaining on the loan. Therefore, even though the total size of a loan for a used boat may be low, the interest rates may be comparably higher than those for a new boat. The same can be true for interest rates on imported vehicles. Since the value of the boat may be less certain, specifically in terms of costs for repairs, interest rates may be higher on imported boats.