What type of loan for boat?

I've been talking with the wife on the type of boat that we would like to eventually buy for the two of us and the kid on the way. We have decided on size/model/type - which was a lot easier than I thought. In this case I was the one looking at a more cost appropriate model - whereas my wife wanted the Lund Pro-V GL because it was sparkly.

Anyways, I do plan on taking out a loan for my boat purchase. It is going to be awhile before I purchase a boat, but I like doing as much research as possible before getting into a big purchase like this. My question to you on these forums is what type of loan do you have and would you recommend it? Are there special incentives worth pursuing at boat shows? I've glanced at a few options and just want to know opinions on them.

First option is a boat loan through anyone who offers it. I saw loans for generally about 10 years at a percentage that goes up to 8% in some cases. That's a good chunk of money to pay in interest alone - this was my least favorite.

Second option is a home equity loan. I have enough equity built up in my house to get a loan (if approved, of course) at a substantially lower rate of nearly 3-4%. Has anyone else gone with this path? If so, would you recommend it - if not, what deterred you? Would anyone highly advise against this?

Third option, which I'm not sure if it is the same as the fist, is a second mortgage. The same reasoning as the second option, lower rate. Same questions from second option. Has any done this? Advise this? Do not advise it?

I am 26, credit near 810-820 last time I checked, if that helps with guiding me on an option that I listed, or something that I didn't list.

I am not hurting for a boat. I don't need one. I want one. That being said, I can wait until the right opportunity comes. I just want to know what is out there. I looked at multiple options based on the interest rates because why wouldn't I try an save interest over the life of the loan if at all possible?

Thanks for any help on this. Like I said, I like to be as informed as possible before taking on something like this.

Boat insured under your home is at ACV. 

Insured under your home you also don't get extras like

- Total loss replacement or agreed value

- Disappearing deductible. Go 5 years or less without a claim you could have a 0 deductible. Then you could raise your deductible and pay for a $2000 DED premium wise but still be at $0 for claims. 

-automatic coverage for electronics and fishing gear at a low deductible

- roadside assistance for your trailer

-If you have a claim it goes against your home. You have weather claim other claims you could get canceled. Then good luck finding Home coverage. If you do you will pay for it.  

- Premium is pretty much the same on it's own as it would be under a Home policy.

Only way I ever suggest putting a boat or atv under a home policy is if the owner has a horrible driving record. Yes, your driving record affects a boat and all rec vehicles. 

My agent told me years ago that the boat is under homeowners insurance while on your property  . Boat insurance once on the road or water .

My boat is insured under my homeowners policy, what is wrong with that?

I wouldn't worry about financing 100% at 0% if your worry is gap in the loan and boat value. Well unless you insure it under your home policy. (Which I would never ever do for many reasons) Companies like Progressive have a total loss replacement coverage option for very reasonable difference in premium for the first 5 years of the boat.

There's really no scenario that going with a 0% APR loan isn't the best option, other than paying straight cash. It is the only situation where you aren't throwing out money on interest, closing costs or origination fees. You could always take out a HELOC to pay off the boat loan if you became tight for money and needed to sell it. While using collateral to finance toys and hobbies is never ideal, the OP is 26 years old with a credit score of 800+, he's proven he can manage his finances responsibly. There is also no benefit from putting money down on a 0% APR loan other than to lower your monthly payments. But you would be better off taking that down payment and investing it either in a retirement fund or a short term investment account to gain an annual return if you can afford the higher monthly payments. That's where having a financial planner is beneficial.

It can turn into a mess if you finance a brand new boat through a HELOC. If after you buy it and something happens (lose job, accident, medical etc) that boat is probably going to be upside down unless you put a sizeable down payment. So if you need to sell it you are going to need to come up with the money to pay the difference first and then try to sell a slightly used boat, which usually sell slow because of the higher price. It's just a messy situation that I would avoid if it was me.  Keep the loans separate then if something happens your boat gets repo'd and you still have a place to live.  Everyone is different it all depends on your comfort level of borrowing money and the risks involved.

Personally I would never take a bank loan for more than four years on anything that will depreciate in value, even at low or zero interest. Ten years is just rediculous in my opinion.  We will be buying a boat here in the next 2-3 years and plan on putting 15-20k down on a 30k boat and covering the rest with a HELOC with the intention of having it paid off in two years. Or just wait two more years (if I can) and pay cash. 

I watched my neighbor die at age 66 a couple months ago. If you want a boat, go buy it because you never know. You should probably put a little thought and caution into it. 

I have never purchased a new boat. I've bought 3 used boats in my life so far, one I got a little stung on due to outboard issues but the issues did not come with the boat rather developed a few years later.

I purchased my current boat used from a dealer. The boat was 2 years old at that time, had low hours and was in excellent condition. I paid 19.5K less than new for this boat. I priced out the same exact boat new as I was considering that route at the time. I was hesitant to buy it with such a large price difference. This used boat has been trouble free for me for 10 years now, minus the gas gauge not working all the time. I paid it off in 3 years.

 I would not recommend using home equity or 401k disbursements for a boat, or financing for 10 years for that matter. As was mentioned, only you should decide how to spend your money. Good Luck and enjoy your boat with your family.

I'm with Shadling - there are far too many factors affecting the decision that clearly no one is considering. In an ideal world, yeah, pay cash for a $30,000 boat.

At 26, investments into a retirement account can expect anywhere from 8-15% annual return rate (double digits the last 3 years), which is significantly higher than the APR of a loan. Short term investments anywhere from 4%+ (closer to 10% the last 2 years). If anyone at age 26 has $20k+ sitting around to buy a new or used boat in cash, they are not managing their finances correctly.

My .02 - go with a HELOC if you have the equity. Low interest rates, low closing costs and the boat is 100% paid for. SOMETIMES dealerships with offer financing with 0% APR on boats. I did this with my truck and would do it again in a heartbeat. No rush to pay it off and your monthly surplus of cash can either be invested or be used to pay off other debt.

Did you end up buying the boat?? Curious as to what route you took.

I tend to buy cars and trucks just before Christmas in a snowstorm. If the Packers are playing in a playoff game, better yet. Amazing how helpful they are 2 days before Christmas when it's 0 degrees outside. Pay cash , when it came to " stuff"  I always saved the money first to see if I really wanted it. Then, I would save the same amount of money again to see if I still wanted it, If I still wanted it I would buy it and have twice the money I needed . I took half and bought it and invested the rest. 

I myself would never take a loan out for a boat for ten years. I also would never use a line of credit, or a second mortgage on my house to buy a boat. If you have to do this, then you honestly can’t afford that boat.

Myself and many boat owners started out small and slowly built up our boat ownership over time. I would suggest that you watch for a nice clean used boat that you can either pay cash for, or take out a maximum 36 month loan to buy.

Use the boat for collateral on the loan. If the lender will not take that, then you know that it is a bad deal.

Save...Save....Save

Just my opinion, but I would never take a loan on a boat or anything else other than a home or maybe your first car/truck. Just a good way to get into financial trouble. Save and pay cash for a reasonable first boat, continue to save and move up in a couple years if you like. That boat, snowmobile, atv, camper will feel so much better knowing it is ALL yours!  I've been on both sides and remember the ugly feeling of the constant loan payments that never seemed to end. Never again.