There's an inescapable fact most people have to face when they buy a boat: they're going to need some money. If they have a well-stuffed mattress, the problem is already solved. But for most of us, the bucks are all that stand between sitting on the dock and owning a whole fleet of boats. There are lots of ways to get that money, but the most popular, for obvious reasons, is a boat loan.
When it comes to borrowing the money to buy a boat, the first thought is usually your bank - the one that handles the rest of your business. You go to the bank and tell them how much you need. Then they feed your information into a computer and in a couple of weeks they tell you how much you qualify to borrow. It's just another loan, somewhere between your car payments and your mortgage.
There's nothing wrong with doing it that way. You can't discount a good relationship with a bank, and in many cases that may be the easiest way to go. But there is an alternative, and that is to pick a company that specializes in boat loans.
Often, buying a boat is not a simple cookie-cutter procedure - especially if it's a sizable, used boat. All sorts of contingencies enter in, and when they do, you may be better off with a company that is familiar with the ins and outs of buying a boat.
You get a lot of benefits when you turn to such a specialist. First and foremost, you'll be dealing with people who handle boat loans all the time and who understand the particulars of boat buying and ownership. In many cases this can make the whole process quicker, easier and cheaper.
The first thing to consider when obtaining a loan is the interest rate, and a specialist can often beat the going bank rate. Sterling Associates, a loan-service company based in Whitinsville, Massachusetts, has been specializing in boat loans since 1991. Tom Smith, president of Sterling, explains that lower rate availability is generally the rule.
"Last year we did over 1,100 boat loans," says Smith. "Because of our volume, our interest rates are lower than a regular bank's. We are usually 100 to 150 basis points lower than what you'll find at a bank. That's equal to one to 1 1/2 percentage points in interest."
Aside from the low interest rate, there are other benefits to dealing with a specialist, such as having someone on your side who really understands boats and the marine market. Smith explains that he routinely deals with details that other lenders just aren't equipped to handle.
"The benefits to the customer are the same as with any retail product when you can talk to someone who understands the whole process. For instance, we can provide a relative valuation of what a boat is worth. It's in our interest to let our customers know if the boat they are planning to buy is valued properly. If we know a boat is worth $325,000 and the customer has made a deal to pay $400,000, and he wants a $300,000 loan, then that is the time to talk to him about it. We offer a second set of eyes to make sure everything will be okay.
"Because we go through the underwriting process, we also go over the credit reports before they are submitted. We spot anything that might cause a problem. If something is outside the formula, a large lender will decline the loan request and simply send out an adverse action report. Prior to our submitting an application, we work with the customer to straighten out any potential questions or problems so that everything runs smoothly."
First Commercial Corporation of America has been specializing in boat loans for more than 40 years, and custom service is its hallmark, as well, according to Bob Schrama, senior vice-president. "We look at each deal on an individual basis," says Schrama. "If you go to a bank, your loan application is underwritten by a computer. They run credit scores that determine your eligibility.
"We look at the whole picture. We have the underwriters and the years of experience. Consequently, we have the authority from lots of our sources to approve deals that would never get bought anywhere else. The customer may have good credit, but he just doesn't fit the ordinary parameters.
"Say we get a customer who owns a pizzeria or some other kind of cash business. We know by his assets that he is not doing all this on $25,000 a year. We will take the time to verify assets. For some customers this is very important. For the person who is self-employed it is a good deal."
First Commercial also works with lenders that have no income-verification program up to $100,000. While no-income verification rates are a bit higher, for the most part, First Commercial's rates are competitive, well below those of a regular bank, says Schrama.
Being able to arrange additional services through the same institution that issues your loan can be another benefit of going with a specialist. For example, First Commercial also offers an insurance service, so the customer gets the benefit of an insurance carrier that understands the boat business. A customized insurance plan can be packaged with the loan.
"I have all the major carriers - we issue the binders right here," says Schrama. "If the boat has to be documented, we do that, and we can arrange for a survey as well. We also do a lot of refinancing for people who are paying more than they should for their boat loans."
Both Smith and Schrama emphasize another benefit to working with a specialty house for a boat loan: speed of service. Most loan applications are approved within 24 hours, 48 at the latest. Combine that kind of efficiency with someone who knows how to handle the details of a boat purchase, and can provide the money at a lower rate than a bank, and it begins to makes a lot of sense to use a boat-loan specialist when it comes time to plunk down the long green for that new fishing machine.