17th Mar 2020 by Rightboat

What To Know Before Taking Out Recreational Boat Loans and Financing

Imagine being in the middle of the ocean, enjoying the breeze and the views. You can fish in the afternoon or in the morning and just lazily chill the rest of the day. You can sunbathe in your own boat without your privacy being invaded by nosy neighbors. Isn’t it the most ideal summer vacation? 

For many people, only rich people can afford to have their own boat or yacht and enjoy the lifestyle of the rich and famous. But if you only ask around a little, you will realize that taking out a loan or financing for any type of recreational boat is not that difficult. If you find the right seller of boats, they can even help you make the process faster and easier to do.

 

What You Need To Know

Acquiring a boat is easy. All you need is to find one and apply for a loan or financing for it. But before you consider looking for a boat to buy, here are a few things that you should keep in mind.

  1. Your credit score - When you are taking out boat loans, a good credit score is always a requirement to get a lower interest rate. So before considering it, you must make sure that your credit score is good. If not, work hard to make your credit score better for faster loan or financing approval.

  2. Marine Survey - Marine survey is only needed when you are acquiring a boat that is second-hand or something that has already been used. It is necessary because your bank needs the accurate market value of the boat you are planning to buy for your loan approval. 

  3. Boat Upkeep - Before you consider acquiring a boat, you should also think about the maintenance and other expenses related to the boat, on top of the price. For second-hand boats, you should probably think of the repairs and upgrades that are needed before you can use them. Other than that, you also need to pay for insurance, slip fees, storage, towing, registration and more.

  4. Tax Deduction - According to code 163 of IRS, boats with cooking facilities, bedrooms and bathrooms are considered a second home so you can actually get a tax deduction by owning a boat. However, there is a limit to the deduction and if your boat exceeds the price limit, then you don’t get the full tax deduction. So although you want a boat, try not to buy the very expensive one. Read this article for - Why boats are Expensive?

 

How To Get Your Own Boat

Here are the steps to finally get that dream boat you have been dreaming of.

  • Pre Approval - Pre-approval is not a necessary step, but a lot of boat vendors ask whether potential buyers have already applied for pre-approval when they are planning to get financing to acquire it. Many vendors prefer clients who are already pre-approved by banks as it makes the selling process easier to do. 

Imagine having to travel to see the boat the client likes, but the client won’t be able to make the purchase because their loan was not approved by the bank. It is frustrating on the side of the vendor and the client, so it is better to just get pre-approved first.

  • Choose a boat - Either you already know a vendor or boat dealer who has access to boats you can choose from or you already found a boat that you like and it is just a matter of contacting them. However you found that boat, it is important you think about it hard. 

Getting a brand new or used boat often needs a downpayment of 10 to 20% of their value. If you choose to buy a secondhand boat, you would need it to be inspected for a marine survey. The inspection is very straightforward. The inspector will just look at the boat to look for any necessary repairs and upgrades. The boat will also be evaluated whether it is ready for use and the expected market value of the boat.

  • Buy the boat -  You can either buy the boat cash or through a loan or financing. Buying the boat cash has some consequences on your tax though. If the money you will use for buying the boat cash is from your retirement portfolio, then you might be given penalties for one-time, huge money withdrawal. So even if you have been saving up for that boat, you might as well choose to get a loan of financing when you buy it.

If you choose to get financing instead of a loan from your bank, you can ask your boat dealer or vendor for a recommendation. The process is easier when the vendor has already worked with the same people making the transaction faster, easier and less painful for you.

 

Final Thoughts

Some people think that boats are too expensive for an ordinary man to have. But if you know the right people and have knowledge about it, then you will see that owning a boat is pretty much like owning a car. Anyone can have it as long as you do your research before getting that boat loan.


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