How Does Boat Loan Financing Differ from Car Loans?

While boat loan financing is similar in its basic structure to that of car loans, there are some important differences as well.

Loan Necessity 

For the most part, most people own a car out of necessity - they need transportation to and from their workplace, the supermarket, or school.  Boat ownership, meanwhile, is considered a luxury - people need cars, but with few exceptions, people do not need a boat.

Loan Co-Signers

Most lenders will permit a home loan or car loan applicant to have a co-signer for the loan and will consider the co-signer's financial stability alongside the main applicant's.  But a boat loan applicant may not have a co-signer on their application - he or she must qualify for their boat loan individually.  Boat loan lenders are also stricter about your qualifications - for example, your "debt-to-income ratio", or the difference between your monthly income and your monthly debt payments, should be under 42%.  Boat buyers also have to consider the different expenses that go with boat ownership - dockage fees, winter storage, and the like - that would also affect your debt-to-income ratio.

Loan Terms

On the other hand, some differences between car loan and boat loan financing may work in your favor.  Most car loans have a 36-month limit - within three years, your loan must be paid off.  However, some boat loans have a much longer term - depending on the amount you are seeking, you may be able to stretch your terms to seven, ten, or even twenty years.  Also, car loan interest is not tax-deductible - but if your boat has a kitchen and sleeping area, you may be able to declare it as a "second home" and may be able to claim your boat loan interest payments on your tax returns.

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