iQuanti: When it comes to taking out a loan to finance your boat purchase, specialist boat loans and personal loans are two popular options for borrowers. Here's a look at how these types of loans work, including the similarities and differences between them.
Boat loans from the dealer
Boat loans from a dealer are specifically designed for boat purchases, whereas personal loans can be used for any purpose.
Specialist dealers typically offer secured loans. This means you'll put up collateral secured to your loan agreement, often the boat that you're financing. The risk with any secured financing is if you default on the loan and are unable to meet the monthly repayments, the lender may repossess your collateral to pay off your debt.
Keep in mind that your loan will only cover the cost of the boat you buy from the dealer, rather than any safety equipment, maintenance costs, or payment for storage or mooring fees.
Personal loans
You may see a personal loan being marketed as a "boat loan," and that's because you can use a personal loan to finance a boat-and you can also use it to finance many other aspects of boat ownership from licensing and registration fees to fuel and maintenance.
When you opt for a personal loan from a financial institution, you can purchase any boat from anywhere. In contrast, a specialist boat dealer loan will only allow you to finance one of their vessels.
Personal loans may be secured loans that require collateral, or they may be unsecured loans that don't require collateral. Unsecured loans tend to have higher interest rates than secured loans, depending on the borrower's income and credit score.
Personal loans also typically come with relatively quick and straightforward approval processes. With most lenders, you can see if you prequalify for a loan without impacting your credit score.
The bottom line
Boat loans and personal loans can both be great options for financing a boat. Secured boat loans tend to offer lower interest rates and use the boat as collateral, whereas unsecured loans have a more seamless approval process and provide more flexibility in terms of what they can finance. Always be sure to calculate the total cost of any loans you're considering and don't hesitate to consult a financial planner to help you make an informed decision.
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Original Source: Boat Loans vs. Personal Loans
