Buying a boat is a great achievement for most people because you can unwind with loved ones on your nearest lake or river, go fishing and have fun on weekends or vacations. If you buy a boat through a loan, you will have a monthly payment plan. These loans can have a payment period of as many as 20 years, so it requires a commitment to keep up with the payment and avoid losing the boat to creditors.
After some time, you might want to refinance the boat loan and change the loan terms or take advantage of better terms offered by a financier. By refinancing, you can save money by reducing the interest rate, the monthly payment amount, or both. Additionally, you will be able to pay off the loan faster, which will be great because you will use the money for something else. Generally, this option enables buyers to get a loan agreement that best matches their present financial state.
Read on to learn about refinancing, its advantages and disadvantages, when to get a boat refi, and how to go about it.
Is it possible to refinance a boat loan?
You can refinance a boat loan like you do with car loans or house mortgages. You are free to refinance the boat loan before the loan duration ends. The purpose of a boat loan refinance is to clear your current loan and replace it. Your current lender or a different lender can refinance boat loans.
Basically, you will begin to repay a new loan. Therefore, you could have a new loan duration, interest rate, or monthly amount. Sometimes, all three terms could differ from what you had in your previous loan plan.
Another critical issue to note is that different lenders have different requirements when offering refinancing services. Some can refinance as soon as you pay a principal. Others will want you to prove that you have paid for at least three months and you paid on time, while others will want you to have paid the monthly payment for at least six months or more.
Advantages of refinancing a boat loan
Refinancing boat loans can have many advantages. These include;
It can help you clear your debt faster.
Paying a loan can be stressful for you, so you will be glad to find a way of paying the debt off faster. When you refinance your boat loan, you can clear your loan faster if you reduce your interest and continue to pay the same monthly payment as before. This way, you will not only finish paying it faster, but you will also pay less.
You can have the name of a co-borrower removed
Some circumstances may make you want to get the co-borrowers name deleted after purchasing the boat. For example, you could have included the person in your buying plans because you wanted to qualify for a lower interest rate with your lender and favorable loan terms. However, now you want to set the person free from the responsibility of financing the loan. Or perhaps, you bought the boat with a business partner or spouse, and something has happened, like a divorce, or you have dissolved the business and want to have the boat under your name. A lender usually won’t agree to remove a cosigner’s name, so refinancing will be your best option to solve your predicament.
You can get a reduced interest rate
Most of the time, it will be impossible to enjoy paying lower interest rates even if the boat refinance rates for such loans are reduced down the line. The best way to take advantage of lower interest rates is to refinance the boat loan.
Change your monthly payment figure
Your financial situation might change down the line. For instance, you may lose a job, your business’s revenue might be reduced, or you might be planning to save and buy something or go on a vacation. These circumstances might make it hard to continue paying your current boat loan without straining financially. Regardless of what changes are happening in your life or your plans, it would help if you kept up with your loan repayment obligations. A refinance may be helpful in such a situation because it will allow you to adjust your loan repayment term or reduce your interest rates.
Disadvantages of getting a boat loan refinance
Even though there are many excellent benefits of taking refinance boat loans, there are also various drawbacks that you should know.
You may pay more money in the long run.
You will pay more over time by reducing monthly payments and increasing the repayment period.
The closing fee can be considerably high.
Like with other loans, you have to pay closing costs when refinancing, which can be higher than a regular loan.
When is the best time to apply for a refinancing loan?
There are various signs that it’s time to refinance your boat loan. These are:
When your credit score gets better
Your credit history is one of the factors a financier considers when deciding what interest rate to set for your boat loan. The better your credit history, the lower the interest you can get. If your credit score improves several months after buying your boat on loan, you can qualify for lower interest rates when you refinance. This will enable you to pay less for the loan throughout the loan’s existence.
If you no longer want a co-borrower
Refinancing offers the best option to remove a cosigner if you want to own the boat and won’t mind paying the loan debt alone.
Do you want to alter your monthly payment
Suppose you realize your monthly payment does not fit your current budget. In that case, refinancing will help you reduce the monthly amount without skipping months, risking losing the boat and damaging your credit score.
The market interest rate has dropped
The government determines the interest rate lenders should use to issue loans in a given period. If the rates are significantly lowered after buying the boat, you can take advantage of the new rates by refinancing.
How do I know if refinancing is the right choice for me?
It is important to note that not every boat owner can qualify for this loan. You may not qualify if:
- There is a prepayment penalty applied to your boat loan
- Your credit score has worsened
- Refinancing costs more than you can afford
- Interest rates have increased since you bought the boat
- Your income has reduced
- You are about to finish paying your boat loan, so it makes no sense to refinance
Steps to take when refinancing your loan
If you still want to go ahead and refinance your loan, this is the process you will follow when taking the loan:
Know your credit score
Go to the AnnualCreditReport.com site to get a free credit report from the three credit bureaus; Equifax, Experian, and Transunion. You are eligible to get the report once a year. Scrutinize every report meticulously and contact the bureau or creditor if you spot any mistake.
Identify what you want to achieve by refinancing
Know whether you want to reduce your monthly payment, remove a cosigner, or lower the interest rate and find a suitable lender.
Apply for the loan
Once you have chosen the right refinance lender, apply for the loan and provide all the personal details required.
Start paying for your new loan
After your application has been approved, you can begin paying for the new loan.
Owning a boat is a dream come true for many people because it allows them to explore the waters around them and have a great time. But sometimes, it can be hard to make this dream a reality because the cost of the boat you want might be thousands or millions, making it hard to afford in cash. Refinancing allows you to have a good payment plan that you can easily pay because the boat refinance rates, monthly payments, and payment terms will be adjusted to suit your financial state.