A yacht is one of the greatest status symbols that a person can own. At the same time, it can also provide a lot of fun for you and yours. However, even those who are relatively wealthy will likely find it more convenient to finance such a large purchase. This allows you to spread the expense out over time, making it easier to handle. In this article, we will attempt to tell you everything you need to know about financing a yacht.
Step 1: Choose A Yacht
When you apply for a boat loan, you will be applying for a specific boat purchase. That means you need to start by picking the yacht that is right for you. Obviously, you should look for something that fits your finances.
To do that, start by deciding how much you can afford to pay each month. Once you know that, you can contact your lender and ask them to give you a rough idea of how much you can afford. Once you have figured out your price range, simply choose the one you prefer from those within your price range. Bear in mind that there will also be storage costs, which will likely add to your monthly expense.
Step 2: Apply For The Loan
Now that you know the cost of your boat, bear in mind that you will need to make a down payment. Your lender probably won’t cover the entire cost. Typically, you’ll be looking at 10%-20% of the purchase price. So, make sure you have that sum on hand.
Contact your lender and let them know you wish to apply for a loan. They will guide you through the steps that need to be taken next. However, we can already tell you that they will want to identify you in person with a state-issued ID. They will also want a large amount of personal information, particularly financial information.
Having recent tax information on hand is a good idea, and you will definitely have to provide them with proof of your income and employment. They will also want all kinds of information about the yacht that you intend to purchase, so have that ready as well.
Step 3: Negotiate The Terms Of The Loan
Once you have been approved, you will need to figure out the exact terms of this loan. By this point, you should already know how much you need to borrow. You should also know roughly how much you can afford to pay each month. However, there are still some matters that need to be settled. While considering these things, you can use this handy loan calculator to juggle numbers and see how they work for you.
There are two basic types of boat loans: Secured and unsecured. A secured loan is guaranteed with a collateral agreement. That’s a fancy way of saying that they will repossess the boat if you default on the payments. An unsecured loan does not allow the lender to repossess any of your assets, but they can still seek damages in court. In most cases, you will have a better chance of getting a secured loan.
The term of the loan will also matter significantly. Boat loans normally have a term of 5-20 years. For a yacht, you are probably going to want a long-term loan. However, be aware that a longer loan will increase the total amount of interest that you have to pay. A shorter repayment term will mean a larger monthly bill, but less interest overall.
On the subject of interest, that also needs to be considered. You need to know the difference between a fixed-rate plan and a variable-rate plan. Interest rates are set by the Federal Reserve bank, and they change periodically. Thus, you might agree to a loan under a certain interest rate, only for the interest rate to increase or decrease at a later time. If you don’t want to take that chance, ask for a fixed interest rate. With a fixed interest rate plan, your total interest will remain at its original rate regardless of the federal rate.
Step 4: Get The Boat And Pay The Debt
From here, the rest is pretty simple. You pay the down payment, your lender pays the rest, and you take possession of the yacht. You will then be responsible for making a monthly payment until the entirety of the loan is repaid. At that point, your debt is cleared and the yacht belongs to you. Of course, it’s nice that you can still use it in the meantime.
As a new yacht owner, you will also need to consider storage costs. You should have already thought about this to some extent, as you obviously need a place to store your yacht. That usually means renting a spot at a local marina, or some other private storage facility. Of course, if you own waterfront property, you might want to build a dock instead. Either way, make sure you have provided for proper storage of your new boat.
A Word About The Current Market
It is worth noting that yacht demand is at an all-time high. While the exact reasons are debatable, the consequences are not. In many cases, you might have to wait awhile in order to get the model of yacht that you want. At this point, demand for these vessels tends to be greater than the supply, so be aware that waiting lists are common practice.
Although we have tried to cover all the important topics, we would urge you to do your own research as well. After all, we are talking about a very large purchase, and it makes sense to educate yourself beforehand. When you are ready to make that big move and get started, you can contact Atlantic Horizon Capital to find out more. As a trusted and high-quality lender, AHC has an excellent record in terms of customer satisfaction.