When you have enough cash on hand, purchasing a boat can be the best way to enjoy summer days or even go on vacation during the winter. What’s more, there are tons of different sizes, makes, and models of watercraft available in Canada, each of which can be ideal for various activities.
Then again, some marine vehicles can be quite expensive and require continual maintenance, as well as storage throughout the years. Since relying solely on your credit cards and savings may not be the best idea, a loan might be the perfect tool to get you back on the water.
What is a Boat and Marine Loan?
Although boat and marine loans can be borrowed from many select lenders across the country, particularly those located near bodies of water, Loans Canada can match you with the lender of your choosing, no matter where you live.
A marine or boat loan is a type of financing that’s used to purchase almost any seafaring vessel. From sailboats to ski-dos to fishing boats. A boat loan from a specialty lender, private lender, or big bank allows you to make this large purchase, often by transferring the money directly to the dealer, although some lenders do offer direct deposit to the borrower. Once the funds are received, you would repay the loan through a series of equal installments.
Types of Financing That Can Help You Purchase The Marine Vehicle of Your Dreams
When it comes to boat and marine vehicle financing, you will typically be able to choose from two different options, known as ‘secured’ and ‘unsecured’ loans. While both of these loan types have their benefits, one can certainly be better for your financial situation than the other, so make sure you understand them correctly before applying.
Secured Boat/Marine Loan
Similar to other vehicle-based financing options, most boat and marine loans will be secured by using the craft’s title as collateral. This means that the lender will retain ownership over the vessel’s title until your repayment plan is complete. If you default on too many payments, they would have the right to seize and resell the asset. In exchange for this collateral, you will often have access to better rates and more credit.
A secured loan is probably the better choice when you feel comfortable using your marine vehicle as collateral and if you’re having a hard time qualifying due to lesser financial health. Nonetheless, you must keep in mind that defaulting could have a worse outcome than with unsecured financing (which results in regular late penalties).
Learn how to compare secured and unsecured debt, click here.
While some boat and marine financing do involve collateral, you can also apply for a traditional unsecured loan, which is safer if you’d prefer not to risk losing your boat in the event of default.
The ultimate drawback here is that your interest rate may be higher and the conditions of the loan less favorable due to the lack of security provided. So, if you are going to apply for a large unsecured boat and marine loan, it’s best to do it when you have a good income, a decent credit score, and otherwise healthy finances.
What Types of Watercraft Are Available to Finance?
Whether you’re looking to start a fishing business or you simply want to do some water-skiing and tubing, rest assured that there is a way to finance the craft of your choosing. That said, the amount of financing you’re approved for must also factor into the size, make, and model that you want.
If you qualify the right boat and marine loan, you’ll have the ability to finance almost any vehicle, including but not limited to:
- Jet skis
- Wake board & Water ski models
Factors to Consider When Choosing a Boat and Marine Loan
As fun as it can be to own a boat or other watercraft, it’s also important to understand that a loan is a significant financial obligation and must be handled responsibly in order to avoid any debt-related problems.
So, prior to applying for any form of boat or marine vehicle financing, there are several factors that you should consider, such as:
The Down Payment – One way of receiving good loan conditions and paying down your debt faster is to offer a respectable down payment of 10% – 20% of the vehicle’s total cost. Depending on the asking price, that down payment can be beyond your budget, especially when coupled with your future payments.
The Interest Rate – Your interest rate can make your payments more pricey than you were expecting. Remember, the best way to receive an affordable rate is to apply with healthy finances or some collateral. You may also be able to choose a fixed rate (that doesn’t change over your loan term) or a variable rate (which fluctuates with Canada’s prime rate).
The Length of Your Loan/Term – Larger boat and marine loans are often separated into several terms, so you may be in debt for a number of years. Being unable to afford your installments during that time, for whatever reason, could lead to financial damage, so if the loan terms your lender offers seem too long, you may have to look elsewhere.
Your Monthly Payments – The amount you’re paying each month for your watercraft will greatly affect your finances. If you lose your job or your monthly payments are too large in general, you may want to renegotiate their size or frequency with your lender.
Additional Fees – When applying for any credit product, particularly one as large as a boat and marine loan, it’s essential to ask your lender about their additional fees, then factor them into your budget. This can include fees for loan origination, administrative purposes, and other services that your lender provides.
Upkeep & Maintenance – Once again, most watercraft, especially large ones require lots of general care throughout their life. You may have to pay to dock and store it at a marina or regularly invest in repairs. You must also budget for insurance and fuel, as well as buying and renewing your boating license.
Bad Credit Boat and Marine Loans
The good news is that there are plenty of bad credit lenders in Canada that can provide you with a boat and marine loan, even if you have bad credit, meaning your credit score is within the 300 – 600 range, due to a history of unpaid debts or other financial issues.
Do you know what your credit score range really means? Check out this article.
Interested in a bad credit boat or marine loan? Consider this first:
- Interest rates are higher than with normal installment-based loans
- Loans are usually smaller and have less adjustable payment plans
- Applying is more complicated (many documents are required)
- Loan security might be necessary (collateral or a cosigner)
- The total cost of the loan may be more than your finances can handle
- Further debt problems and worse credit will occur if you default on payments
- Researching a subprime lender is more critical, as there are many predatory companies and scam artists when it comes to bad credit loans
Although a bad credit boat and marine loan can be somewhat less appealing than one that you would receive through a prime lender, it can still allow you to purchase the watercraft you want. In addition, complete payments will gradually improve your credit score, as long as you apply with a lender that reports to Equifax and/or TransUnion.
Nonetheless, improving your credit score as much as possible prior to applying can help you earn more favorable loan conditions all around, since good credit is a sign that you have a greater chance of paying your installments on time.
Borrow Using Your Boat
Are you looking for cash? Well, if unsecured loans aren’t an option for you, you can always consider securing a loan against your boat. A secured loan implies less risk for the lender, and therefore, a larger chance for you to qualify for the loan you are seeking – even if you have bad credit.
A secured loan can also allow you to qualify for a larger loan.
In order to apply, some of the things you will need to know about your boat include:
- Boat Model
- Boat Valuation
- Boat Year
Typically you may borrow up to fifty percent of the boat’s value, which is a substantial amount of money if you have a boat that is a newer model. This money comes in handy in today’s economy, as you may need to pay for school expenses, car expenses, home mortgages or other expenses. Note also that in securing a loan against your boat, you are simply using your boat as collateral for the loan – you, the borrower, would get to keep your boat as you repay the loan.
Keep in mind that existing loans or liens against the boat cannot be present.
How Much Does it Cost to Own a Boat in Canada?
Watercraft come in all shapes, models, and prices, so it can be tough to calculate how much your own vehicle would cost you in the long run. You’ll also have to decide whether you’d like to purchase a used or new model. Obviously, a full-sized houseboat will end up costing much more than a dinghy with an outboard motor.
For the sake of argument, let’s say you’re trying to purchase a regular leisure-style motorboat for fishing, water skiing, and other activities. In that case, you would have to consider these kinds of basic costs:
- Purchase Price – A standard 6-passenger motorboat can cost $20,000 – $30,000, maybe more for a brand new model with all the features and accessories (not including interest and fees).
- Boating Gear – Life jackets, oars, and other emergency supplies can be expensive but necessary. That equipment, coupled with any toys (wake boards, inflatables, etc.) can wrack up a bill of $500 – $2,000.
- Licensing & Insurance – In Canada, you must obtain a Pleasure Craft Operator Card to drive any boat with an engine over 10 horsepower. The test costs around $50, plus $20 – $30 annually for the ID card. If you are caught without a valid license, you’ll be subject to a $250 fine. A basic motorboat may also cost $300 – $500 per year to insure (more if it’s a larger model).
- Storage – Marina storage fees will vary greatly based on location, servicing, and how large your boat is. It generally costs $2 – $5 per foot, per month, plus $300 – $700 to shrink-wrap it for outdoor storage during the winter. Indoor storage will be pricier at around $100 – $500 per month for a 20 – 30 ft. craft (more if it’s stored in a stacking facility). A popular marina or yacht club might also charge you an introductory membership fee of $5,000 – $10,000 (plus renewals), as well as a monthly cost to rent a slip throughout the summer.
- Fueling & Maintenance – While these costs will also vary based on what type of boat you have and where you store it, most boat owners pay 10% – 20% of their craft’s purchase price annually for repairs, cleaning, and maintenance. Hopefully, you can save money by storing the boat on your property and performing these tasks by yourself.
Finance Your Watercraft Today
If you’re looking to purchase a boat or other marine vehicle this summer, be sure to speak with the experts at Loans Canada. We can help you find the right loans, financing solutions, and lenders in your area. Just call us today or check out our website for more information!