The internet is full of click-bait tactics, false advertising, promotions that don’t really exist, and rates that aren’t updated and don’t fit the product they’re being advertised for. Unfortunately, this is often the reality for the super low interest rates that some boat lenders claim to offer. Once you further inquire about these low interest rates, they have either expired, don’t apply to loans for boats, or are ‘conveniently’ no longer available.
In some cases, the companies are fly-by-the night companies looking to make some quick money before changing names or going out of business. In other cases, the rate may be low but the lender fees, points, application fees, origination fees, and a whole lot of other fees make the boat no longer affordable.
But, let’s assume that you found a low interest rate, possibly 3%, 3.5% or even a rate under 3%, and it’s a real rate offered by an actual company that has been in business for a while. So, what’s the catch? The loan term is for three years! You think, okay, no big deal, my car loan is a three year term, but a boat loan is usually for a much larger amount than a car loan, so your monthly payment is going to be huge! It may be even more expensive than your mortgage. And that is not the goal of loans for boats.
Let’s take a look at an example. You want to purchase a new cabin cruiser so you and your family can spend days and even a couple nights onboard without spending the extra money for a yacht. You want a nice model that’s luxurious but maybe not the very top of the line model. Expect to spend upwards of $100,000. Let’s say the final cost of the boat is $120,000.
You put down a down payment of 20% which is $24,000, so your boat loan amount will be $96,000. This is the cost of the boat minus the down payment. Now, let’s assume, you have excellent, top-tier credit, a score of 800 or above, substantial income, and an acceptable debt-to-income ratio, etc., and meet all the other lender criteria. You qualify for a 3% boat interest rate. This means your monthly payment will be approximately $2,792. That does not include the costs of insuring your boat, storing it, maintaining it, docking it, or cleaning it. For most people, that monthly payment is unmanageable, not affordable, and it’s hard to even contemplate spending that much on a boat. I mean, it’s not a yacht with a helipad and a jacuzzi!
That’s exactly why reputable boat lenders and marine financing companies offer longer boat loan terms, typically between 10 and 20 years. These longer loan terms shrink your monthly payment, making it more affordable.
So, next time you see those low boat interest rates creeping up on your computer screen, make sure you find out all of the details, including how long the loan term is for.