Boat loans for Young Professionals

[jpmccros]

I desire to purchase a ~40ft sailboat to live on, but i only have enough cash for ~50% of the asking price. So i need to finance the rest. The trick is I am a young professional with no house and very little assests but a good sized income. I'm renting a house for $675 a month, so basically blowing this away that i could use on a boat payment. All the "normal" people think I'm crazy to live on a sailboat (live in Tennessee), so if figured i would ask people like me on this forum. Any advice would be appreciated, thanks.

Here are some specifics:

-Desire a boat that will cost $70,000 after closing costs, etc.
-boat will be made in 1980-1990
-Intend to place a down payment of $30-$40K
-Intend to borrow no more than $40,000
-Plan to pay this off in less than 3 years
-I've been at my job for 2 years with a good job security for the future.
-Currently have a $14,000 dollar truck, but only $7,000 is paid off. I could pay it off now but I'm trying to build up credit.
-Have a school loan of $10,000 that once again using to build credit.
-No house, or any potential assets.

Are there any marine financers that specialize in boat loans that would use the boat as actual collateral and grant me my loan?

Are there any people that have had similar circumstances and successfully received a loan?

[skipmac]

Without assets, collateral or a long job and credit history it is really difficult to get a boat loan. I used to be in the business and basically in your situation you almost have to prove to the bank that you don't need the money for them to loan it to you.

Problem is, unlike a house, a boat is very poor collateral; high depreciation, high risk of loss or damage and too portable IE the collateral could sail off into the sunset.

I would say the best option is to get someone to cosign for you. Have any family members with good credit that like you a lot?

[witzgall]

Maybe you can look for a boat that costs what you have in cash. As a young person, you have been taught that going into debt for big things is the way to go about it. But many find out later in life that there are some serious drawbacks. For instance, if you find that you want to move, better job, no job, whatever, it is harder when you have an asset that is leveraged.

As a single guy, no way you need a 40 foot boat. Nice, sure. I live on a 35 footer with a wife and two cats. It would be huge for just me.

Also, many, many people buy their first boat, and find out, for many reasons, that it is not the boat for them. If you have a loan on it, it is that much harder to switch to the right boat.

Lastly, you may find out that the liveaboard life is not for you. As cool as it seems, it is not for everyone.

Chris

[David_Old_Jersey]

Or Owner finance? The price is likely a "fuller" sale price.........

[sailorboy1]

Just google boat loans (Essex Credit, Boat US etc) and apply for a loan and see what they say.

With a 50% loan to value target and a good icome to debt you probably are going to be fine.

[jpmccros]

Witzgall,
Yes I'm technically single but got a GF that seems to like me and she is on board with this. So is a boat for two. I've done my homework, chartered boats 36ft and understand what I'm getting at and what I'm needing to live on. Let's assume the boat is the perfect choice for me and that I can live aboard with no issues.

I do agree living in debit is no way to live, and that's why I plan on parting everything off in 3 years. My parents/I own a 30ft day sailor so I understand what too small is.

I'm more interested in making this happen, for I've calculated that renting right now is wasting my money. I can live in debt for 3 years. I just need a way to get this financed and cosigning may be a potential, but I would really like to do this on my own.

[Octopussy]

Depending on the bank/ finance company, you might not be able to get a loan on a boat older than 15-20 yrs. Each company differs, but anything older than 20 yrs, from what I understand, you will not likely be able to get financing for.

Also, they don't like the term "liveaboard." If you tell a finance company that you're buying the boat to live aboard, that will also impede your ability to secure a loan.

If you work with a good finance guy, he can help you "navigate" these issues.

I am not an expert, but these were some of the things that we found out as we tried to find a boat.

As some have said here, you might be able to find something that the owner is willing to finance, or find something you can pay cash for. That's probably your best bet.

Good luck,

S/V Octopussy

[Mike OReilly]

Originally Posted by jpmccros

Are there any marine financers that specialize in boat loans that would use the boat as actual collateral and grant me my loan?

As a Canadian our banking systems are fairly different, so this example may not translate directly to the US. However, the two boats I've purchased so far were both partially financed through our local credit union. These are small, local banks. I think the US has many such institutions (although far fewer than there once were). Anyway, in both cases they used my boat as collateral ... no problem at all. And both these boats were 30+ years old.

Ignore the big banks. Go talk to your local community bank. Heck, do that anyway.

[denverd0n]

Originally Posted by Octopussy

Also, they don't like the term "liveaboard." If you tell a finance company that you're buying the boat to live aboard, that will also impede your ability to secure a loan.

I've heard this before, and it makes absolutely no sense to me. Understand, I'm not doubting the truth of it, just saying that it is completely illogical.

When it comes to home mortgages, you can get a bigger loan if you say it is your residence, rather than a second home. The reasoning is that you will be willing to do more, make more sacrifices, to keep up with the payments on your primary home than you would for a second home. Why the underwriters for boat loans would conclude the exact opposite, completely escapes me.

[jpmccros]

Yea I've been co fused on that too. But maybe there are statistics saying living on your boat creates higher probability of damaging (aka fires)?

[TaoJones]

In addition to all the things Octopussy stated, if the vessel is financed, your lender will force you to keep it fully insured. Insurers also dislike covering liveaboards and older vessels.

I'm on board with those who've suggested not buying anything that you can't pay cash for. And keep in mind that what you pay to get into a vessel is really just a down payment . . . the recurring costs of ownership are significant and must be accounted for as well.

Everyone, it seems, must experience the truth of the maxim that the two happiest days in a boatowner's life are the day he buys his boat . . . and the day he sells it. YMMV.

TaoJones

[jpmccros]

Thanks taojones. I am prepared to take on these costs and anticipate the frustration of owning a boat. I would just like to do this now and pay it off on three years rather than continuing to rent and be able to purchase in 3 years.

[Lake-Effect]

Originally Posted by jpmccros

-Currently have a $14,000 dollar truck, but only $7,000 is paid off. I could pay it off now but I'm trying to build up credit.
-Have a school loan of $10,000 that once again using to build credit.

I guess this is how I know I'm old; I would never have carried debt simply to prove that I can carry debt. What sort of interest are you carrying to make this point? I'm guessing that a solid employment record and low debt would be more impressive to the credit bureau.

It's completely understandable to me that an older boat is a riskier subject for a loan and insurance than real-estate, so on the face of it, I don't think financing an expensive boat is a sensible move for you right now.

In fact, it's hard to see how even just buying a $40k boat for cash will get you much further ahead, once you factor in marina and maintenance expenses. However if you're supremely confident that you will continue to earn a good income, and you're willing to tough out any of the problems of boat ownership and being live-aboard... it could work.

[jpmccros]

Agreed, it seems weird and maybe I'm doing it wrong but I've heard its better to show you can make consistent payments rather than paying everything off. The downfall of paying everything off would mean that most of my down payment money would be gone, and still no one would give me a loan. I would love to pay it all off now and get a boat loan, but right now I feel that my down payment is giving me more leverage at this time. Also it gives me more confidence that if I did find a 40k boat I could manage that in cash...but have yet to see a boat that is along those lines. Plus you have to worry about the quality of a cheaper boat and how much work/money would be required after the purchase.

[boatsail]

Originally Posted by Lake-Effect

I guess this is how I know I'm old; I would never have carried debt simply to prove that I can carry debt. What sort of interest are you carrying to make this point? I'm guessing that a solid employment record and low debt would be more impressive to the credit bureau.

It's completely understandable to me that an older boat is a riskier subject for a loan and insurance than real-estate, so on the face of it, I don't think financing an expensive boat is a sensible move for you right now.

In fact, it's hard to see how even just buying a $40k boat for cash will get you much further ahead, once you factor in marina and maintenance expenses. However if you're supremely confident that you will continue to earn a good income, and you're willing to tough out any of the problems of boat ownership and being live-aboard... it could work.

If you don't have a history, you cannot buy a home. IF you make 100k a year and do not have revolving credit cards and cars that have proven you have a track record of payment, you cannot buy a home.

100k and 0 credit history would make sense to me that you would be a safe person to lend money for a home, but it does not work that way.

I am in the biz of homes. Friend of mine does investments. Owns a 425k home. financed at 5.5 percent. Owns at least 3 other homes outright in cash(she buys and fixes and sells). Usually has about 450k or so of her own cash out at anytime on the homes she is working on. She has about 600k reserves in a savings acct. She went to lender to refinance her personal residence to get a rate below 4%. Lender said because of her "employment status" 1099 with high deductions, she cannot refinance. She could pay it off with cash if she wanted. She has great credit. There is more to current underwriting guidelines than most people know. what is logical is most often not followed in regards to lending.