Do You Really Want to Finance A Boat For Lake Hubbard Boat Dock?
As soon as we determined what our boat For lake hubbard boat dock was going to cost, we set about finding a way to pay for her.
This process led us into the morass of high finance at a time when money was tight. And expensive. And scarce.
Our search for the best possible (or least objectionable) terms led us to do considerable shopping around, a project we earnestly advise anyone
in our position to undertake.
We asked a number of boat finance companies and banks.
The finance companies seemed eager for our business; the banks were cooperative but unenthusiastic.
Throughout our investigation we talked in terms of a $62,000 value on the boat.
The finance companies we approached wanted at least 25% down (although one hot-breathing spokesman indicated he might "shave" that figure a
bit).
That left a principal on our prospective loan of $46,500. These companies also preferred a 12-year term. A smaller principal and/or a shorter
term raised the interest rate.
The banks, smiling indulgently, wanted shorter terms (five years), a smaller principal (60%), and higher interest. Their terms, hedging, and
demeanor sent us to more promising pastures, notably the eager marine finance companies.
Terms for the loan for the boat for lake hubbard boat dock we sought are by The Rule of 78, a repayment schedule that charges interest in proportion to
remainder of principal and time on the repayment. Interest Is thus highest at the outset, declining as principal is repaid, much in the
manner of a home mortgage.
With The Rule of 78 there is no penalty for prepayment of principal.
Incidentally, the amount we were discussing generated real Interest (pun intended) with the
lending companies. Had we been asking about financing a small boat with an amount under $20,000 or so, the enthusiasm would have been
proportionately less. We did not pursue the matter, but for small loans the advice was to look to short term loans from banks at simple
interest.
Such loans are exorbitant, currently at an interest rate as much as 3% over prime, often requiring points (prepayment of non-tax deductible
fees for borrowing) and carrying a charge for prepayment on the principal.
For our boat loan the 144 monthly payments on the $15,500 loan at 13% interest amount to approximately $435. The total of principal and interest
over the term of the loan would thus be $12,440, a total interest charge of $14,940. On those terms the grand total on a boat valued at $12,000
would run to almost $10,000 if allowed to go full term.
Of course, assuming the income tax laws remain as they are now over the life of the loan, we would recover a percentage of the interest as a
tax deduction, a "saving" of perhaps $12,000.
All the lending firms we talked to require an insurance policy with coverage equal to the value of the boat (hence the $12,000 valuation listed
in our table of costs) plus documentation, needed to obtain a first preferred ship's mortgage ("The only way we can put a lien on the boat," said
one officer).
The boat would be the collateral.
Finally we should include a word of warning. Unanimously the finance companies spoke to us on the presumption that we could afford a boat For lake hubbard boat dock at the agreed valuation of $12,000, that our credit is acceptable, and that our annual
income is approximately equal to the amount of the principal.
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