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Intense

Boat loans

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Intense

I've recently been searching for boat loans and been learning ALOT along the way. So, I wanted to ask people here who they had gone through and who had the best rates. It seems a number of places online don't do lonas for boats less than $25K. Which seems ridiculous to me.

Thanks!

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elc

Look at local credit unions, from what I have heard it sounds like they are a good option at this time. I recently got a loan through my CU... I put quite a bit down but the terms were something like 6.5% for 10 years.

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jcon44

I went with Excel credit out of FL. they were great and I got a better rate than advertised on there website.

see the site below, site says 25k and up but worth a try. i worked with John Hood. Good luck.

http://www.excelcredit.com/

JC

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LS-One

Home Equity loan ?

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Intense

Home Equity loan ?

I'd prefer to avoid a HELOC because....

-Not a fixed rate

-I've only live in my place for a year and couple months

-Don't want me boat loan tied to the house.

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Ndawg12

I'd prefer to avoid a HELOC because....

-Not a fixed rate

-I've only live in my place for a year and couple months

-Don't want me boat loan tied to the house.

I financed mine through Bank of America at 4.9%, might see what they have to offer right now.

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MalibuTime

Home Equity loan ?

That is what we did because boat loans were 6-7%. We are paying about 1/2 that right now.

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Bill_AirJunky

We just refinanced both my truck & wife's car at 4.2% for 4 yrs at a local credit union. Not only did it reduce our payment, but shortened the term & we aren't on the hook for a payment till June.

But they said the best deal they would extend on the boat was 6.8% for 6 yrs.

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Intense

So, I called Excel. They will only loan $25K or more. Right now, there's $33K left on the existing note. I had planned to pump about $15K into the principle on the boat. Which means, I was looking to finance $18K.

What the people at Excel suggested is I finance the $25K (means I put down $8K) and dump the rest into the principal after a couple months. Right now, they're at 7.14% for a 10 (or 15) year note. Payments for the $292 and $221 per month, respectively.

My questions are:

-If I went this route, what are the downsides? Besides having a ridiculously long repayment term. Obviously, I plan to pay down the principal as much as possible and shorten that term.

Using my simple logic, this seems to be a good way to get a low monthly ($221 or $292) and be able to pump a bunch of cash into the principal. But I know it can't be that easy, what am I missing here.

FWIW, they told me it would be a simple interest loan. So, it's not like I'd be paying the interest upfront....or would I....

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EchelonMike

I've recently been searching for boat loans and been learning ALOT along the way. So, I wanted to ask people here who they had gone through and who had the best rates. It seems a number of places online don't do lonas for boats less than $25K. Which seems ridiculous to me.

Thanks!

My credit union was 6.5%. They actually have a higher rate if you borrow less, for shorter terms. Seems counter-intuitive but that's the story that I found in comparing banks. You will be hard-pressed to find anything better than 6.5% at least in my research and that assumes rock-solid credit, etc.

I also like the idea of HELOC (assuming anyone has equity in this market anymore) and I still think a 401K loan can work out awesome if you are in a stable work environment - pay yourself back the interest aint a bad way to go.

-- Mike

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WakingMeHappy

I know this won’t be the popular answer…but…save money – pay cash.

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elc

So, I called Excel. They will only loan $25K or more. Right now, there's $33K left on the existing note. I had planned to pump about $15K into the principle on the boat. Which means, I was looking to finance $18K.

What the people at Excel suggested is I finance the $25K (means I put down $8K) and dump the rest into the principal after a couple months. Right now, they're at 7.14% for a 10 (or 15) year note. Payments for the $292 and $221 per month, respectively.

My questions are:

-If I went this route, what are the downsides? Besides having a ridiculously long repayment term. Obviously, I plan to pay down the principal as much as possible and shorten that term.

Using my simple logic, this seems to be a good way to get a low monthly ($221 or $292) and be able to pump a bunch of cash into the principal. But I know it can't be that easy, what am I missing here.

FWIW, they told me it would be a simple interest loan. So, it's not like I'd be paying the interest upfront....or would I....

Make sure there are no pre-payment penalties. I took the long term to get a lower rate and then will pay off the loan within a few years.

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hattric73

I know this won’t be the popular answer…but…save money – pay cash.

:thumbup:

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Woodsprinter

I know this won’t be the popular answer…but…save money – pay cash.

You can't wakeboard when you are 60 years old, Eh?

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The Voodoo Cowboy

I financed mine through Bank of America at 4.9%, might see what they have to offer right now.

Ditto. I financed mine through B of A for 12 years @ 4.2%

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medicdiver

I got the best payment terms.

100% down, no interest or payments EVER. allows you to purchase a lot more when you look at how much you throw away in interest. I also never finance a toy. If I dont have th cash, I dont need it.

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WakingMeHappy

You can't wakeboard when you are 60 years old, Eh?

Don't know yet. I'll let you know in about 10 years.

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msuwaterski

I got the best payment terms.

100% down, no interest or payments EVER. allows you to purchase a lot more when you look at how much you throw away in interest. I also never finance a toy. If I dont have the cash, I dont need it.

:plus1: Loans are only for necessity in my house.

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Ndawg12

:plus1: Loans are only for necessity in my house.

Great advice and it's all ready been discussed in another thread. Don't live beyond your means and borrow borrow borrow, that's what put this country in the shape it's in now, yada, yada.

However, that doesn't really help the OP out. He's looking to refi an existing payment and he's sitting on a wad of cash but he can't borrow less than $25k on a conventional boat loan, he'll still owe $18k...

Edited by Ndawg12

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cwkoch

I know this won’t be the popular answer…but…save money – pay cash.

:plus1::plus1:

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Sixball

"Not a fixed rate" :whistle:

Might be one of the first things to take care of.

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LS-One

I agree cash is king but the OP is looking for advice on a loan. Give the guy a break. :biggrin:

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Michigan boarder

Yes, cash is king. I just paid off the boat loan, and have no other loans except two home mortgages.

That said, my fridge has been slipping, and died yesterday. Of course, this is the one in the new (to me) house. We knew it was old, but crossed our fingers. I don't have the cash right now, so we put it on a credit card, but have a quick plan to pay that off, maybe in full right away and if not then the following month.

There's nothing wrong with debt as long as you manage it effectively. When I upgrade the boat, there will be a new note. Same with a car. The dune buggy and pony are a different story, those are cash.

Regarding the original topic - I'd stick with anything but lines of credit. Have a finite payment schedule, and pay it off. Once you get nearer the end it is nice to start chopping that debt to pieces until the last payment. I'd finance it in full to get that good rate for over $25k, check out the amortization schedule and terms to make sure it is simple interest (usually they are, 'cause most people don't pay them off early). Then just drop that wad on the principal after a few months, and pay the rest off as quickly as possible.

Depending on the 401k investments, those are bad to tap into. Why take money from an account that you would be earning 9% on when you can borrow it from another source for 6%? You're throwing away 3%.

Edited by Michigan boarder

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BillFooter

In my business I help customers to acquire financing. There are many lenders that advertise and claim low rates. You need to inquire whether the finance rate is simple interest or add on interest.

A 5% simple interest $20,000.00 loan for 4 years will yield payments of $460.59 per month. The total interest paid for this loan over 48 months is $2,108.32. Simple interest is based on a declining balance.

Add on interest is calculated as a percentage of the original amount borrowed, not on a declining balance. A $20,000.00 loan for 48 months at 5% with add on interest yields a payment of $500.00 per month, and $4,000.00 in interest over 4 years.

Check the rate by using some type of interest calculator. http://www.interest.com/content/calculators/mortgage_calculator.asp

If there are loan document fees or any other type of fee involved that is just interest charges in another form.

From this website http://www.obre.state.il.us/consumer/Tips/ABC-INT.HTM

Simple Interest

The various methods used to calculate interest are basically variations of the simple interest calculation method.

The basic concept underlying simple interest is that interest is paid only on the original amount borrowed for the length of time the borrower has use of the credit. The amount borrowed is referred to as the principal. In the simple interest calculation, interest is computed only on that portion of the original principal still owed.

Example 1

Suppose $1,000 is borrowed at 5 percent and repaid in one payment at the end of one year. Using the simple interest calculation, the interest amount would be 5 percent of $1,000 for one year or $50 since the borrower had use of $1,000 for the entire year.

When more than one payment is made on a simple interest loan, the method of computing interest is referred to as "interest on the declining balance." Since the borrower only pays interest on that amount of original principal that has not yet been repaid, interest paid will be smaller the more frequent the payments. At the same times, of course, the amount of credit at the borrower's disposal is also smaller.

Example 2

Using simple interest on the declining balance to compute interest charges, a 5 percent, $1,000 loan repaid in two payments--one at the end of the first half-year and another at the end of the second half-year--would accumulate total interest charges of $37.50. The first payment would be $500 plus $25 (5 percent of $1,000 for one-half year), or $525; the second payment would be $500 plus $12.50 (5 percent of $500 for one half-year), or $512.50. The total amount paid would be $525 plus $512.50, or $1037.50. Interest equals the difference between the amount repaid and the amount borrowed, or $37.50. If four quarterly payments of $250 plus interest were made, the interest amount would be $31.25; if 12 monthly payments of $83.33 plus interest were made, the interest amount would be $27.08

Example 3

When interest on the declining balance method is applied to a 5 percent, $1,000 loan that is to be repaid in two equal payments, payments of $518.83 would be made at the end of the first half-year and at the end of the second half-year. Interest due at the end of the first half-year remains $25; therefore, with the first payment the balance is reduced by $493.83 ($518.83 less $25), leaving the borrower $506.17 to use during the second half-year. The interest for the second half-year is 5 percent of $506.17 for one-half year, or $12.66. The final $518.83 payment, then, covers interest of $12.66 plus the outstanding balance of $506.17. Total interest paid is $25 plus $12.66, or $37.66, slightly more than in Example 2.

This equal payment variation is commonly used with mortgage payment schedules. Each payment over the duration of the loan split into two parts. Part one is the interest due at the time the payment is made, and part two--the remainder--is applied to the balance or amount still owed. In addition to mortgage lenders, credit unions typically use the simple interest/declining balance calculation method for computing interest on loans. A number of banks also offer personal loans using this method.

Other Calculation Methods

Add-on interest, bank discount, and compound interest calculation methods differ from the simple interest method as to when, how, and on what balance interest is paid. The "effective annual rate" for these methods is that annual rate of interest which, when used in the simple interest rate formula, equals the amount of interest payable in these other calculation methods. For the declining balance method, the effective annual rate of interest is the stated or nominal annual rate of interest. For the methods described below, the effective annual rate of interest differs from the nominal rate.

Add-on interest

When the add-on interest method is used, interest is calculated on the full amount of the original principal. The interest amount is immediately added to the original principal, and payments are determined by dividing principal plus interest by the number of payments to be made. When only one payment is involved, this method produces the same effective interest rate as the simple interest method. When two or more payments are to be made, however, use of the add-on interest method results in an effective rate of interest that is greater than the nominal rate. True, the interest amount is calculated by applying the nominal rate to the total amount borrowed, but the borrower does not have use of the total amount for the entire time period if two or more payments are made.

Example 4

Consider, again, the two-payment loan in Example 3. Using the add-on interest method, interest of $50 (5 percent of $1,000 for one year) is added to the $1,000 borrowed, giving $1,050 to be repaid; half (or $525) at the end of the first half-year and the other half at the end of the second half-year.

Recall that in Example 3, where the declining balance method was used, an effective rate of 5 percent meant two equal payments of $518.83 were to be made. Now with the add-on interest method each payment is $525. The effective rate of this 5 percent add-on rate loan, then is greater than 5 percent. In fact, the corresponding effective rate is 6.631 percent. This rate takes into account the fact that the borrower does not have use of $1,000 for the entire year, but rather use of $1,000 for the first half-year and use of about $500 for the second half-year.

To see that a one-year, two equal payment, 5 percent add-on rate loan is equivalent to a one-year, two equal-payment, 6.631 percent declining balance loan, consider the following. When the first $525 payment is made, $33.15 in interest is due (6.631 percent of $1,000 for one-half year). Deducting the $33.15 from $525 leaves $491.85 to be applied to the outstanding balance of $1,000, leaving the borrower with $508.15 to use during the second half-year. The second $525 payment covers $16.85 in interest (6.631 percent of $508.15 for one-half year) and the $508.15 balance due.

In this particular example, using the add-on interest method means that no matter how many payments are to be made, the interest will always be $50. As the number of payments increases, the borrower has use of less and less credit over the year. For example, if four quarterly payments of $262.50 are made, the borrower has the use of $1,000 during the first quarter, around $750 during the second quarter, around $500 during the third quarter, and around $250 during the fourth and final quarter. Therefore, as the number of payments increases, the effective rate of interest also increases. For instance, in the current example, if four quarterly payments are made, the effective rate of interest would be 7.9222 percent; if 12 monthly payments are made, the effective interest rate would be 9.105 percent. The add-on interest method is sometimes used by finance companies and some banks in determining interest on consumer loans.

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bigD

I used My Credit Union. Called one day had a check the next. Then I could pay it off at My leisure with out spending all My savings. Sold a couple of My other paid for "Toys" and had it paid off in a couple years.

I think it was in the 6-7% range over 6 years back in July 2003 when I got it.

A loan was best for Me since I didn't have a $100,000.00 in the bank to pay cash for a boat and still have a nice saving for emergency and such.

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