4 Reasons To Refinance Your Yacht [Boat Loans]

With loan rates lower than ever, more boat owners are refinancing.

Thinking about refinancing a loan on your boat? Rates have reached a new low — as of March 15, the Federal Reserve cut its benchmark interest rate to 0%. Which begs the question, should you seize this opportunity to refinance and save money? How low do loan rates need to go before you refinance your loan? If you’re considering refinancing the loan on your yacht, we’ve outlined the top 4 reasons to determine whether refinancing is a wise financial decision.

Reason #1 – Interest Rates Have Dropped To Zero

Whether you’re thinking of refinancing a boat, your home, or credit card debt, you’re probably doing so because rates have gone down. The primary reason many loans are refinanced is to to lower your interest rate. Here a some points to consider:

• • Predicting future interest rates can be difficult. Your best bet being, to evaluate financing based on current rates. With recreational loan interest rates currently averaging 3.99%, there is no reason to keep predicting they will get better than this anytime soon. For this reason, we recommend you refinance now.
• • Your monthly payment may be lower as a result of the new rate and or chosen term.

So, how much lower should rates go to justify you refinancing? It’s safest for you to do your own math to determine what’s best for you.

• • How much money could you save each month?
• • What is the total cost of refinancing your loan? None.
• • Ready to explore your options of refinancing? Let us do the work for you.

Reason #2 – Your Credit Score Has Improved

Has your credit score improved? You may be able to qualify for a lower rate. For the best rates on your yacht loan, a FICO score of 700 or more puts you in a good position. Don’t know your score? Get your score for free with a variety of online tools.

Reason #3 – You Need To Pay Less Monthly

Maybe you’re looking to lower your monthly payments. You may consider refinancing your loan for a term that is longer than your original loan. Though you will be paying your loan for longer, your monthly payments can be reduced. This is not a conventional option, but can be a good one for those needing to lower their payments on a month to month basis.

Let’s say the loan on your yacht is a $300,000 20-year loan with an interest rate of 4%. After 10 years of those payments, your outstanding balance would be ~$143,698. Your principal would be ~$971 and your interest would be ~$482 at this point in time. If you take that same loan, and refinance your $143,698 loan to a new 20-year fixed rate loan, your payments, kept at the same interest rate, drop to about ~$870 per month.

Adding an additional ten years of payments to your loan results in you paying far more in the end than you would have had you not refinanced, so it is not something we would typically advise. However, your monthly payment would be lowered, so it can be a great solution for those who need to decrease their spending in the short term.

Reason #4 – You Want To Extend Your Original Factory Engine/ Component Coverage

By refinancing, we can provide a vessel service contract, which is an extension of factory protection, allowing your boat to get the coverage needed and including it in your monthly payment. Not to mention, the interest saved might be enough to recover the cost of the said extension. Or, if your boat currently has no warranty, but is 10 years or newer, you can also receive factory protection, based on survey or pre-existing conditions.

These extensions are cancellable and transferable by law.

Ready to explore your options of refinancing? Speak to our yacht financing experts: