Does Spring Have You Thinking About Buying a Boat? 3 Things to Know
Spring is the start of many things, from warmer weather to blooming flowers. It’s no wonder people look for ways to enjoy those changes.
For some, that means heading out on the water to spend time with friends and family — which may put buying a boat in your mind.
Here are three tips to help make the process easier on your wallet.
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No. 1: If you can, pay with cash
“As with a car, the best way to buy a boat is to pay cash for it, if possible,” says Matt Schulz, LendingTree chief credit analyst. “However, they’re expensive, so that’s a pipe dream for many people.”
The average cost of a new boat can range wildly, whether you’re looking for an inflatable boat that costs less than $200 or a yacht that costs millions of dollars. You also need to consider:
- Whether you’re willing to buy a used boat
- How often you intend to use it
- Gas costs
- Maintenance costs
- Must-have features versus extras you can live without
- Docking costs
- Boat trailer costs if you plan on transporting your boat over land
No. 2: Not all boat financing options are created equal
“A personal loan or boat loan can be a useful way to finance a boat purchase, but it’s not the only way,” Schulz says. “You could get financing through the boat dealership, though those rates may not be the best. You could also consider a home equity loan or home equity line of credit (HELOC).”
Still, Schulz warns about using these financial products, noting that home equity loans and HELOCs “can offer better rates than other types of loans, but they’re not to be entered into lightly. You’re putting your home at risk if you default, and that’s a scary proposition.”
As with any financial decision, you’ll need to consider the pros and cons before moving forward with any loan or debt, especially for a large purchase like a boat.
Typically, using a high-interest rate option like a credit card is a bad idea — unless you can pay off that debt before your next billing cycle (when interest would be charged).
No. 3: Always shop around to compare loans
“Shopping for a boat loan can be like shopping for a car,” Schulz says. “It’s about finding a loan with the best rate to give you monthly payments you can manage. Shopping around to get prequalified for a loan can help you find the best possible rate and keep those costs down.”
Prequalification estimates your potential rate without impacting your credit. (If, however, you’re having trouble qualifying, focusing on improving your credit by signing up for autopay on bills and credit cards and reducing revolving debt can help.)
Separately, preapproval gives you a clearer picture, though that requires a hard pull on your credit. Some of the factors you’ll want to look at in a preapproval are:
- APRs
- Term lengths
- Fees (origination, late, prepayment, etc.)
- Loan amounts
For those who want a closer look, use a boat loan calculator to assess its impact on your budget. That way, you can forecast long-term costs to better understand what lender offers the best deal and — ideally — ensure that you easily make those payments.