Getting the Best Financing

Tens of thousands of places offer boat financing, including thousands of lenders on the Internet. Corning Credit Union does boat financing too. Because anybody can say they are a boat lender, and because fine print rules boat finance contracts even more than auto finance contracts, picking a lender is your most important decision. Picking the right lender for a boat loan is even more important than picking the right lender for a car loan. Why? Boat loans generally last more years than car loans. Accept an interest rate that’s only one percent higher than you need to on a $40,000, ten-year boat loan, and you throw away up to $4,000 dollars in unnecessary interest payments!

How lenders determine what you can borrow

“Remote” lenders—those that never meet you but transact business by email and regular mail—generally loan you a percentage of the rigged boat’s selling price. At CCU, we do that, too: your credit plus the boat’s selling price determine what you can borrow.

But the difference in lenders can be startling:

• Some lenders “load up” contracts with fees and processing charges that can increase as your loan increases.
• Others advertise low rates, then raise them dramatically when your loan application is actually processed.
• Other lenders require “backup” collateral. For instance, they may require you to use your home as a backup asset for your boat loan. These folks tend to lend you much more money than you can afford to pay back, then if you default on your loan, they attach your home or other backup asset.
  
  A warning: Unfortunately, some of these lenders also promise you a credit card as a bonus with your boat loan. The credit card is also tied to your home equity. What happens if you can’t make the credit card payment? They go after your house!
• Some lenders even offer “balloon” payments with their boat loans. There are two variants: 1) Your payments are cheap for the first year, and then payments rise dramatically for the rest of the term. 2) Your payments are low for the term of the loan, then a large lump sum is due at the end. What’s the result of balloon-payment loans on boats? Many people get in deep financial trouble.

Finding the lowest total-cost loan

Here’s a simple way for you to make sure you are getting the boat loan with the lowest overall cost. This technique, incidentally, has saved CCU members thousands of dollars on auto loans.

• Do your homework on the boat you want to buy, using the tools on this site.
• Pre-apply for a boat loan at CCU. It costs you nothing to get this “baseline” look at your boat credit-worthiness. While you’re at it, ask CCU about the reasons, other than interest rate, which help make a CCU boat loan usually the best, cheapest, and safest loan for you. Here are our phone numbers if you wish to talk to us and you can apply online.
• Use this “baseline” approval to help you compare loans at other sources. Do it like this:
  
  • Ask any potential lender to completely fill out a sample loan contract for the exact terms the lender will give you for a boat loan.
  • Bring that contract to CCU. We’ll compare the exact terms of their loan to our loan.
  • If they are cheaper, we’ll send you to them!
  • And what if they won’t give you a copy of the contract they want you to sign? Don’t go with that loan. Don’t finance with people that won’t let you fully compare actual costs.

Prepared for Corning Credit Union by Remar Sutton & Associates, April 2003. Reviewed and updated March 2007. All rights reserved.