Boat Loans

What to Look Out for with Boat Loans

Boat loans are just a special type of loan that you can use to finance your yacht purchasing needs. All rules of normal loans apply, so it may be a good idea to get to grips with what fixed and variable interest is, maturity and so on. What makes car loans, RV loans, boat loans, etc. special is really not that much. It's just that it defines what you can use it for. You can't apply for a boat loan for example and then buy a house with it.

The Basics

Let's get to grips with the basics first. Usually for specialized loans the most important thing that everyone looks at is the APR. the average percentage rate is the cost of your loan, ie. the added extra that you pay. If you take out a $1.000 at 5% APR, for 10 years it means that you would have to pay $100 each year if you would only have to pay back the loan. The APR is a percentage you pay extra every year, so instead of $100 yearly, you pay $150 the first year ($50 is 5% of $1000). If you want to be thorough, you can calculate your total costs by calculating APR for each year. Be careful though, that each your debt amount is getting smaller. In the first year we paid $50 extra, but in the second year this will only be $45, because we only have $900 left to pay back.

Why Get a Specialized Loan?

The simple reason behind it is that you can usually get better terms. If you take out a loan from a bank you can spend it on anything, you may bury it underground and loose it, whatever you want. If you take out a specialized loan it is obvious you got something of value, and that is important to the bank issuing the loan. The eligibility criteria may also be lower, this of course depends on who you're doing business with.

What to Look Out For

As with any loan, try and get a fixed interest rate. What happens is, if you get a loan, say at a 8% interest, the interest is usually calculated daily. If interest rates rise, yours will also rise, it can go up to 10-12, whatever the market dictates. If you get a fixed interest rate then you can be sure that you will pay 8% whatever happens. Some loans offer interest-locks, which you have to apply for, but if eligible, you can rely on the 8%. If you are into finance news you may choose variable rates if you think that interest rates will be going down. In this case you will have to pay lower interest. It may be worth the risk because you can lock interest rates any time with some companies.

It is important with boat loans that you go to a valid seller. There are so many sites on the internet that I could just not trust looking at their web page. A cool looking web page can still be a fraud, but it is less likely. Check if the company is listed and so on, be sure to go to reliable people for loans.