iQuanti: Dreaming of owning a boat and spending your summers cruising on the open water? The cost of this dream can run high, and you'll also need to budget for insurance, dock fees, winterizing, licensing, maintenance, and fuel. While boats are expensive, there are a few ways to finance one, from taking out personal or boat loans to using the equity in your home.
Cash or Credit Card
If you don't have enough savings for your purchase, you might be tempted to pay by credit card. Be aware that interest rates on credit cards are often significantly higher than personal loans and will also cut into your credit limit. These are some of the many reasons why many people turn to personal loans for financing their boats.
Boat loan
Specialist boat loans are available as either unsecured or secured financing and come with fixed interest rates and monthly payments so you know exactly how much your loan will cost.
Unsecured Boat Loans
An unsecured loan won't use the boat or any other asset or property as collateral, but you can expect higher interest rates on your loan due to the additional risk to the lender. This is a good option if you're looking for a low-risk loan and are comfortable paying higher monthly repayments.
Secured Boat Loans
In contrast, secured boat loans are backed by the boat itself as the collateral. If you default on your loan payments, the lender may take possession of the boat. Secured boat loans may be right for you if you're financially stable and unlikely to miss a payment.
Personal loan
If you have a solid credit score and verifiable income, a personal loan could be a good solution, and these products often come with competitive interest rates and flexible repayment features. Personal loans may either be secured to an asset, or unsecured so your boat, home, or any other asset won't be required as collateral.
Once your loan application has been accepted, you'll receive the lump sum of cash to your bank account, allowing you to negotiate with the boat seller as if you were a cash buyer.
Home equity loans
Home equity loans can be a method for financing a boat, but there is a heightened risk to the borrower with this type of financing - if you're unable to repay the loan then you could lose your home.
It can also take years to build enough home equity to be eligible for a loan, and these products typically have variable interest rates and high closing costs. Remember, financing for luxury items like boats should never be prioritized ahead of necessities like a roof over your head and paying for healthcare.
The bottom line
There's no one-size-fits-all approach to financing a boat, but for many, boat loans are a viable funding solution. Your decision should be based entirely on individual circumstances including your credit score, the cost of your boat, current savings, and other financial goals. Don't hesitate to consult with a financial planner when considering how to finance your boat.
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Original Source: 4 Ways to Afford a Boat
