Financing a boat that will cross borders

[DerivativeGuru]

I am an American considering purchasing a boat in Europe that will be transported and used primarily in SE Asia.

Does anyone have any experience to know how American lenders would view lending on such a vessel?

Thanks in advance for any advice!

[BandB]

Very difficult if at all possible. If someone finances it for you it will be based on outstanding credit and basically based on you personally more than the boat value.

The problem is that in the case of any default, the cost of recovering the boat could be enormous if even possible for the lender.

Where are you living or will you be living?

[DerivativeGuru]

I suspected it might be an issue...unless some type of special insurance or bond was available in such a circumstance.

I split my time between residences in the States and Phuket, Thailand.

[BandB]

Originally Posted by DerivativeGuru

I suspected it might be an issue...unless some type of special insurance or bond was available in such a circumstance.

I split my time between residences in the States and Phuket, Thailand.

Their interest is really going to be in income and other property. i don't know your residency status or ownership or situation in Thailand, but likely your better chance of financing would be there.

[Hud3]

Our lenders (two of them, as we refinanced at some point) only required that we maintain an insurance policy with hull coverage that recognized them as a Named Insured. The loan documents had no limits on where we could sail, nor any requirement that we keep the lender apprised of where the boat was kept. We were outside the US for most of the time that we owned the boat, though we maintained a US address through a St Brendans Isle Personal Mail Box.

So, I'd say it depends on a specific lender's policies. You'll have to ask specific lenders what their specific policies are.

[alanhanes]

We purchased a boat from Guatemala last year and the financing was incredibly difficult. We finally worked everything out through Essex Credit. Here are 5 things we encountered:
1. Several lenders would not accept an out of the US survey.
2. None of the lenders would finance it until it was in US waters. (they don't seem to care where you go afterward)
3. We ended up only financing about 40% of the actual price.
4. After a very long negotiation and planning process, we ended paying a large portion up front before bringing the boat to the US for final funding of the financed portion. This was quite scary, but the previous owners were also taking the risk with us.
5. Insurance arrangements were also tricky because we did not actually own the boat while crossing the Gulf of Mexico. We finally purchased a joint policy with the previous owners named.

Hope this helps. I highly recommend Essex Credit Corp. They were the only ones willing to help us figure out how to actually work through and finalize everything.

[DerivativeGuru]

Thanks for sharing your experience, Alan.

Sounds like the 'will not finance anything until it is in US waters' might be an issue in my situation. I have found plenty of good boats in the US, but lower transportation costs from the Med to SE Asia lead me to focus on vessels there.

May I ask why they would only finance 40% ?

Interesting that you say it doesn't matter where it goes once financed in US waters. I wonder if that still applies if you were to ship the vessel?

Thanks again. Real world experience is hard to beat!

[Stumble]

It really depends on how the loan is structured.

If you are trying to take out a secured loan with the boat as security it will be pretty close to impossible. Banks don't like to lend money on assets that could be anywhere in the world and they have no way to track them.

If you want a personal loan to pay for the boat then it isn't any more difficult than getti any personal loan.

Often the best option if you are keeping your house is to refinance the house and use the money to buy the boat.

[DerivativeGuru]

I don't have enough equity in my house in the States to cover this...so, that option is out. I suspect the amount is too much for an unsecured personal loan. In terms of Thai financing...I have never heard of anyone doing that, but the interest rates would probably be too high to be appealing to me.

Based on AlanHanes's experience, it sounds like my real issue is that the boat would not be in US waters to finance. Does anyone know of a lender who would finance a boat in European waters for an American?

I will also look at boats on the West Coast of the US and compare shipping costs. Maybe not that much difference since their would be no canal fees.

Thanks to everyone for you replies.

[BandB]

Lenders just aren't inclined to finance boats that are elsewhere. Your scenario just isn't reasonable for them. It doesn't matter what the loan is called or collateral given, when the boat is half way around the world it's an unsecured personal loan. It may look secured but they're not assuming they could ever get the boat. Therefore if you don't have the credit for a personal loan then no US lender is going to finance this. Like Alan, you might get something like 40% financed.

And as to Thailand, boats are financed all the time in the area including Thailand. Most probably by Singapore banks. But then if you're not an established resident, they might have similar concerns to the US bank but that you'd take the boat and head to the US.

Boat financing remains a tough market as does all recreational financing. Troubles develop and boats get sacrificed before houses and cars. In the last five years there have been a high percentage of defaults on boat loans.

Buying in the US is probably going to be your best option. It may well be the lower US prices will offset the cost of shipping, depending on the boat.

[valhalla360]

Hud: Did you make the bank clearly aware of your plans and they confirmed that is was OK or did you just do it and since the bank kept getting the monthly payment never had reason to ask?

[accomplice]

We purchased a foreign flagged vessel. Our lender was happy to write the loan as long as we had an insurance policy with a breach of warrantee waiver (even if I took it somewhere I told the insurance company I wouldn't, the insurer would pay the lender on a loss claim) and as long as they had a preferred ships mortgage registered on its US documentation.

The lender didn't care where we took the boat.

[alanhanes]

"May I ask why they would only finance 40% ?"

This was a compromise between us and the seller in order for the seller to be comfortable watching me sail off in his boat before receiving all funds. We paid about 40% up front, and the remaining 60% was wired to him through the finance company once they confirmed the boat was in the US.

[Hud3]

Originally Posted by valhalla360

Hud: Did you make the bank clearly aware of your plans and they confirmed that is was OK or did you just do it and since the bank kept getting the monthly payment never had reason to ask?

I checked the loan docs before we headed out of the US and there were no requirements that the boat remain located in the US, nor any requirement that we notify the lender of the location of the boat. So I saw no need to inform them.

[DerivativeGuru]

Originally Posted by accomplice

We purchased a foreign flagged vessel. Our lender was happy to write the loan as long as we had an insurance policy with a breach of warrantee waiver (even if I took it somewhere I told the insurance company I wouldn't, the insurer would pay the lender on a loss claim) and as long as they had a preferred ships mortgage registered on its US documentation.

The lender didn't care where we took the boat.

Just to be clear...you purchased a vessel in another country and financed the purchase with an American institution in foreign waters?

If so, may I ask the name of your lender? Terms?