Tuesday, October 16, 2012

A Basic Guide To Marine Finance

Buying a boat is an expensive business which few of us can enter into without resorting to some sort of finance deal. While some may favour direct loans from banks or savings institutions, others may go down the route of a marine finance company.

What does a Marine Finance Company do?

Here are some examples:-

It can provide marine finance in the small boat market with loans up to about £50,000, probably using a fixed rate of interest, over a period of maybe 5 years.

- For larger boats, with loans exceeding £50,000, the facility is usually a variable rate and is usually over a period from 5 to 10 years.

- It can help you to refinance your existing boat by providing funds to cover an expensive overhaul, new engine or some other large bill.

- A mortgage on the vessel is normally required for all of these loans. If you live in the UK you may find it easier to obtain a loan if you register your boat on the Small Ships Register (SSR).

There are many specialist marine finance companies and it is worth while examining them carefully for the deal that suits your requirements best. They will have helpful and informative websites and will give you free quotations according to your requirements, but on the whole the procedures will be similar.

- First you need to find out the money you need to contribute, the deposit, the interest rates, terms and small print.

- Next you will have to be "approved" by filling in a "loan application", "finance application" or "credit application" in which you will provide information about yourself and confirm that you have the wherewithal to pay the loan back. The sort of details you will need to provide are proof of income, credit information and some personal information about you and your family, such as where you live and how long you have lived there. They will also want to know what you want to do with your boat; whether it is for recreation, racing, to live on, or a business venture.

- The finance company will need to do a personal credit search and will probably ask for a copy of bank statements, recent household bills and photo identity.

- Usually the deal can be completed in a day or so.

The documents you will need consist of a marine mortgage document, which is the loan agreement, and a standing order with your bank to transfer the agreed monthly payment. For a new boat, the finance company will require the original invoice or bill of sale from the boat builder to you. If it is a used boat that you are purchasing you will need a bill of sale to be completed by the current owner of the boat agreeing to sell the boat to you and possibly a survey, depending on the age, value and type of boat.

You must have your boat comprehensively insured.

What types of payment plan are currently available?

- Balanced Payment Plan - This is the most popular. Monthly payments are fixed and stay the same for the entire period.

- Deferred "Balloon" Payment Plan - The monthly payment is reduced by deferring some of the mortgage to the end of the finance term. It is an attractive proposition if you plan to sell your boat before the payment is due.

- Low Start Payment Plan - There are lower monthly payments in the early stages, with annual increases in the following years.

- Variable Rate Payment Plan - These are linked to a bank base rate so that repayments move up and down according to fluctuations in the interest rate.

- Tailored Loans - These plans are tailored to fit individual cash flow requirements.

When making a big decision on taking out a loan to finance your boat, the best advice is, first arm yourself with the basic ins and outs of marine finance as shown above and then shop around until you have found a friendly and reliable finance company who will provide you with a package that suits your needs. And do remember to read all the small print.

Happy hunting!

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