Buying a boat is a major investment, and finding the best boat loan Canada can offer is often a daunting task. But don't worry! We've put together five simple tips to help you secure the best boat loan with the top interest rate and loan terms available. These guidelines focus on choosing reliable marine lenders, opting for flexible loans terms, understanding fees, avoiding unnecessary boat dealer add-ons, and using an amortization chart. With these strategies, you'll be well on your way to boat ownership with absolute confidence. Lets hit the water!
1. Pick a Reputable Dealership or Lender
Your journey to the ideal boat loan with the top interest rates begins with selecting the right partner. A reputable dealership or lender will not only find you the best interest rates, but will also cater your monthly payments and find you the right boat loan options for your budget. Investing in a boat is a substantial financial commitment, so the last thing you want is to get tied up with an unreliable boat dealer or lender.
Exploring major banks or credit unions is where you should start as they will likely offer you the best interest rate. Unfortunately, they are also the toughest to secure boat financing through, especially with a low credit score. They may push you toward an unsecured personal loan or home equity loan options, however tying your home to a recreational loan isn't always ideal.
If your bank doesn't seem like it is going to help you, the next step is to research boat financing options from both offline and online sources. Gather recommendations from trusted sources like friends, family, and experienced boat owners. Also, read reviews and ratings of lenders or dealerships to get an insight into their customer service, loan terms, and general credibility.
Some dealerships get paid to sell you a higher interest rate. This is why it is important to shop around or consider boat financing options which broker to multiple lenders. If you feel like you're getting pressured on your boat purchase, or the interest rate isn't lining up to your credit history - you may be a victim of getting sold a higher rate for your boat financing.
We suggest using boat dealers or online lenders who allows you to finance watercraft from outside of their inventory. Most boat dealerships will lock your boat loans specifically to their inventory which greatly limits your choice and may make you jump into a purchase that you are not entirely happy with. A dealership broker who offers Canadian boat financing on private sales opens up the doors to buying from classified sites such as KIJIJI or Facebook Marketplace so that you can find the best deal out there.
2. Make Sure the Loan is Open to Extra Payments
Flexibility is a crucial factor in any boat loan. Always secure boat financing that allows for extra payments without penalties. This can be incredibly beneficial, allowing you to tack extra cash directly at the purchase price, the principal balance, without additional costs. This allows you to pay off your loan faster, ultimately saving you a significant amount in interest.
Most lenders who are reputable will have zero prepayment penalty, however there are other lenders who may try to take advantage of buyers; especially those with a lower credit score. Regardless of if you have good or bad credit, you should never accept any loan that doesn't allow for extra payments, whether it be boat loans or a personal loan.
3. Ensure That You Understand the Fees and Costs Involved
Understanding the associated fees of your boat loan is key to avoiding unpleasant surprises down the line. When evaluating a potential loan, ensure you're familiar with all the costs involved - both upfront and ongoing.
Common dealership fees may include application fees, prepayment penalties, late fees, and even annual or monthly service fees. These charges can add up quickly and significantly increase the cost of your loan. A trustworthy lender will disclose all these fees upfront, allowing you to make an informed decision.
If you're shopping for a used boat from a private sale, you will also be charged a brokerage fee. The vast majority of online marine lenders do not disclose this fee up front, so you should do your due diligence in ensuring this cost is noted and accounted for.
In addition to fees - in order to get a boat loan, a down payment may be required. If you are set on certain monthly payments for your dream boat, this down payment may help get your there. If you're working with lower credit scores and bad credit history, a larger down payment may be required to lower risk for the lender.
4. Don't Be Tricked into Buying Protection You Don't Want
While purchasing a new boat, you might be offered various add-on products such as extended warranties or insurance products. While some of these might be beneficial, don't be pressured into buying protection you don't need or want. Research and understand what each protection plan offers before deciding whether it's necessary. A well-informed decision will save you from unnecessary expenses and keep you from inflating the cost of your boat loan. A couple of options that they may offer are broken down here:
- Extended warranties: Having extra peace of mind might be beneficial, but it is important to ensure that you understand the boat manufacturer warranty so that you aren't double-dipping on protection. It is also paramount to ensure you are aware of the period in which you are covered, especially if you are financing an expensive boat and tied to long term boat loans.
- GAP Protection: This insurance covers the negative equity from the loan amount in the event that your new or used boat is stolen or written off. GAP protection typically covers throughout your loan term and pays a lump sum, the difference from your insurance payout to the total amount owing. There are other factors which may impact a payout, so ensure to read the policy carefully before accepting the terms.
5. Get an Amortization Chart or Breakdown
Lastly, you should ask your lender for an amortization chart or breakdown. This chart outlines your payment schedule over the life of your boat financing, showing how each payment is divided between interest and principal.
Understanding your amortization schedule can give you a more profound insight into your financial situation and how quickly you're building equity in your boat. It's also a useful tool for planning extra payments, as it shows when you'll save the most interest (typically early on in the boat financing term).
In the end, financing a boat doesn't have to be an intimidating process. By understanding these five simple concepts, you can ensure you're getting the best boat loan in Canada and can soon be sailing the seas with peace of mind. Use our boat loan calculator as assurance that the payments being presented are match the costs that the dealer has presented. We wish you the best on your boat financing journey and hope you'll check out our other posts below for more information!
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