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Financing a Boat Purchase: What Options Are There For Buying a Boat?

18th April 2019

Buying a boat can be a significant investment and not all of us have the luxury of being able to make such a purchase with cash. Whether you are looking to buy a RIB worth a few thousand pounds or invest in a six-figure commercial fishing boat, the problem of how to finance that purchase is a common issue faced by many would-be boat owners.

In this feature, we take a look at some of the ways you can finance a boat purchase including some options that you may not have thought of.

Firstly, a big disclaimer is necessary here. Find a Fishing Boat is not a financial organisation nor are we affiliated in any way to any of the companies that are listed in this article.

Financing a boat purchase can be a big commitment and it is essential that you look very carefully at the terms outlined in any agreements that you enter into to. You should ensure that any monthly repayments are affordable and that you are aware of the consequences of missing any of these premiums to your lender. If in doubt, it is always useful to [seek advice from an Independent Financial Adviser]( https://www.unbiased.co.uk/).

Specialist Boat Finance

Typical marine loans last from between two to fifteen years with rates currently starting at around 6% APR.

Depending on your income, you could finance the cost of a boat purchase of anything from a few thousand pounds up to a few million. Some boat loans are offered with zero deposit required, effectively financing 100% of the purchase cost.

It is worth remembering that the more money you can advance on the cost of your boat purchase then the lower your monthly repayments will be. You can also help reduce the regular outgoings by increasing the payment term of negotiating a balloon payment at the end of the term of finance.

Remember that the longer the term of your boat loan, the more you are repaying in total.

You can find a full list of UK-based marine finance companies in our directory below.

Marine Mortgage

Okay, so this option will not be applicable for many boat purchases but could come in to play for some buyers. If a vessel may legally be defined as a houseboat then, technically, it could qualify for a mortgage.

The legal definition of a houseboat is one that can be open to some interpretation but is generally understood to mean a boat, or similar structure, that has either been specifically designed, or adapted, for use as a single-family dwelling, either in whole or in part.

Often, houseboats do not have any means of self-propulsion (either by wind or mechanical means) but this has been shown not to be a principle definition. Many houseboats (including canal boats, barges and yachts) all have the ability to cruise.

If you are thinking of buying a boat which qualifies as a houseboat or which you intend to convert into a dwelling then you could consider approaching a traditional mortgage lender to discuss your options.

Mortgages are known for being one of the cheapest ways to borrow money, particularly for long periods and for high-value investments. However, the interest rates for houseboats are much higher than for bricks and mortar properties for two reasons:

there is an increased risk associated with an investment that is literally sitting on top of a flood! there is a higher risk of the owner absconding as they could quite easily up anchor and move location.

Most high-street lenders do not have the facilities to prepare a mortgage offer on the basis of lending against a houseboat. However, most of the companies we have listed in our directory below can offer a houseboat loan which can be lower than a standard offer to finance your boat purchase.

It is worth remembering that, just like with securing a mortgage on a property, you will need to have the vessel surveyed to confirm its value and its integrity plus ensure that adequate insurance is provided to protect the investment.

As with bricks and mortar property, the range of mortgage products varies considerably and you will need to speak to a marine mortgage specialist to get a tailored quote

Unsecured Personal Loan

An unsecured personal loan is a form of borrowing where the lender does not require any form of security against which to tie the advance that they offer you. In this respect, it is you who is responsible to meet the obligations to repay the loan and the boat itself is just another of your assets rather than being the principle collateral.

If you fail to make payments on an unsecured loan then you are still liable to settle this debt and your lender may take action to force the sale of any assets you own to recover the cost of the loan.

Unsecured loans are therefore riskier for lenders and the interest rates offered will be much higher than those you could access with a secured personal loan (see below) or mortgage (see above). However, in some cases these may be lower than the rates offered by specialist marine insurance. The interest rates you can access will be determined by your credit score, the sum you wish to borrow and the term over which you intend repaying the loan.

The maximum sum that most people can borrow on a unsecured basis is £25,000 with typical terms being one to seven years. Rates can start as low as 4% but are more typically around the 6%-7% with many reaching the 15% mark. If you have bad credit then it is not unusual to see unsecured loans being offered at rates of almost 50%!

Secured Personal Loan

If you own a property then securing a personal loan against this equity could be a more cost-effective way to access the funds needed to buy a boat.

Secured personal loans are exactly what they seem; finance that is attached to an asset. In this way, a lender has security that if you fail to make repayments in accordance with your loan agreement then they have a legal right to seize the asset against which it was secured in order to settle your debt.

It is less risky for lenders and the rates they can offer reflect this and can be as low as 2.5%.

It goes without saying that you should consider this option very seriously before committing to any agreement as your home would be at risk if you could not meet the repayments.

Negotiate with the Seller

It is always possible that the seller whose boat you are interested in buying may be amenable to the idea of payment via instalments or taking an existing boat in part (or full) payment. There may be other arrangements that you can come to with the seller and we know of many ‘swaps’ that have taken place over the years which include a boat being purchased with assets as diverse as cars, property, land and even valuable artwork.

Open a conversation with the seller to see if there is any ground for a more ‘alternative’ way to transact business.

Credit Cards

Firstly, this is not a ‘recommended’ or ‘low-cost’ option. Using a credit card to finance the cost of buying a boat, however, could be suitable for some people in some circumstances.

Depending on the price of the boat you are thinking of buying, a credit card can offer a useful, but instant, way to access the finance you need in the short term.

Some people have large credit limits and low interest rates which can make using a credit card an affordable alternative to a personal loan.

Credit cards could therefore be an effective ‘bridging loan’ if you are able to meet the cost of a boat purchase via other means (such as the sale of an existing boat or other asset) but for which the funds have not yet been realised.

Before using a credit card to buy a boat, make sure you understand what the repayment costs will be. If you have a low introductory interest rate for a credit card then calculate how these repayments will change once this reverts to a standard APR.

Paying for a boat using a credit card is usually only available when buying a boat through a marina or boatyard or buying new directly through the manufacturer.

Friends and Family

Friends and family are usually a last resort for most people when it comes to borrowing money and we are reminded of this wise quote:

Before borrowing money from a friend, decide which you need more; the money or the friend.

Money can certainly make relationships with family and friends quite strained but, for some, the arrangement could be an ideal solution to financing problems.

Only you can decide whether this is a suitable option but, if you do go down this route, it is worth formalising a loan of this nature with some form of written agreement or contract.

Shared Ownership

And finally, if all of these options prove unaffordable, inaccessible or unappealing then there is one more option to consider before you abandon your dreams of buying a boat.

Shared ownership means exactly what it suggests and can mean that, by pooling your finances with someone else, you can own a share in a boat.

This is most often someone you know well such as a colleague, friend or family member but could also be a group of people. Unlike the option above this means you are not borrowing money for your own project but, rather, it is a joint investment.

As such, you should expect to share all aspects of boat ownership including the overheads of running expenses, maintenance costs, mooring fees etc as well as the benefits that owning a boat brings.

When entering into an agreement like shared ownership of a boat, it is recommended that you draw up a contract which details the percentages owned by each party and their liabilities. Owning a boat can be a long-term investment and although you may well enjoy a good relationship with your intended co-owners now, a legal document detailing all this information is simply good practice. Without seeming morbid, if one party were to pass away, such a document should detail how the ownership of the vessel is to be inherited or where co-owners should have the first rights to buy the deceased’s share of the boat.

It is recommended that you consider these aspects before entering into this kind of joint purchase arrangement.

Directory of Boat Finance Companies

Please note that this list is not exhaustive but covers the main marine finance companies in the UK. To clarify, we are not recommending, nor are affiliated to, any of these providers and we do not receive any commission for products and services you may buy when clicking through these links.

Always read the full terms and conditions of any boat finance offer and make sure you understand your obligations before signing on the dotted line.

It is also worth pointing out that some of the companies listed below are actually brokers rather than direct lenders but they are all geared specifically towards specialist marine, or asset, finance.

Good luck!

[Arkle Finance]( https://www.arklefinance.co.uk/sectors/consumer-asset-finance/boat-and-yachts) [CGI Finance]( https://www.cgi-finance.co.uk/ ) [Close Brothers]( https://www.closeassetfinance.co.uk/marine-finance) [Lombard]( https://www.lombard.co.uk//lombard/products-services/types-of-asset-finance/leisure-marine-finance.html) Pegasus Marine Finance [Promarine Finance]( https://www.marine-finance.org/) *[SGB Finance]( https://www.sgb-finance.com/uk/)

FAFB and Buying a Boat

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