When comparing boat loans, it’s important to compare interest rates so that you can know which loans will end up costing you more and how much you’ll pay for the loan overall. Your financial situation has a lot to do with determining what sorts of boat loan rates you might be eligible for, and so do the types of loans and lenders you might consider to help you finance your boat.
Types of Boat Loans: Secured vs. Unsecured Loans
A secured loan uses an asset as collateral, which means if the borrower fails to make timely payments, they forfeit their collateral to the lender. With many secured boat loans, the boat being financed is the collateral. The main advantage of a secured loan is that it tends to offer a lower interest rate than unsecured loans. The main drawbacks for some people is that secured loans may require a down payment, and some people are not comfortable with the possibility of losing an asset.
Unsecured loans have no collateral, and the consequences of failing to make payments on an unsecured loan usually involve fees and drastically hurting your credit score. The main advantage of unsecured loans is that there is no collateral needed and they tend to be easier to apply for and more straightforward than secured loans, as there is no need to evaluate collateral. The main drawback of unsecured loans is that they tend to have slightly higher interest rates than secured loans.
Types of lenders: traditional and non-traditional
Every lender may offer different loans with different terms.
Non-traditional lenders, such as the boat manufacturer or dealership, refers to lenders who do not specialize in loans, but offer loans to finance their boats. These will usually be secured loans, and use the boat being financed as collateral. While these loans may offer competitive interest rates, they usually do not allow you to finance other expenses. The interest rates may also be determined by the value of your boat.
Traditional lenders are financial institutions who specialize in loans. Traditional lenders tend to offer a variety of loan products that can be used to finance a boat, and you can also use an unsecured personal loan to finance other expenses such as docking fees, maintenance, etc. One of the main advantages of borrowing from traditional lenders is being able to choose from a variety of loan products that best suit your needs, and in most cases the interest rates will be fixed and you’ll know exactly how much you’ll have to pay each month.
Your financial situation
With any type of loan, your income and credit score will be major factors in determining the interest rates. In general, the better your credit score, the better options you have. However, if your credit score isn’t quite where you want it to be, there may still be plenty of loans you could qualify for, and many financial institutions are offering ways for you to see if you prequalify without impacting your credit score.
The bottom line
Boat loan rates ultimately vary from lender to lender, but knowing what kind of lender you want to borrow from and what type of loan you want to use can help refine your search for the right boat loans for you.