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Borrowing for your boat

When thinking about a loan for a sailboat, the usual sources are unsecured loans, marine loans (or yacht mortgages), and borrowing against equity in your house.

Unsecured loans are avilable from many different sources, including high street supermarkets. Tescos for example does competitive personal loans, although restricted to about 25,000 pounds. If you are looking for flexibility or larger amounts then you will probably have to speak to your bank manager.

Yacht mortgages may carry an overall cost that is extremely competitive with home loans. Terms on fixed rate boat loans are comparable to home loans, and boat loans do not require the same level of paperwork. The loan is secured against the boat itself, so the bank will require a survey before the loan is approved. Generally lenders will advertise that the loan can be used to buy any kind of yacht or boat, but they will need a survey to ensure that their risk is minimised. If the vessel is of wooden construction or of an unusual type, the maximum amount that the bank will lend may be reduced. The total amount of your advance will as always depend on your personal circumstances.

Using your house presents its own difficulties. The equity in a house will often be the family's greatest investment, and so it should be used with care. The value of the boat cannot be guaranteed, and a bank will be reluctant to advance cash on the back of a yacht. Your house should be seen as a last resort.

The Bank of Scotland have an online facility for obtaining quotes for marine mortgages and loans, and have increased their profile with extensive advertising on boats.com and the brokerage database at ybw.com. Lombard, a division of the Royal Bank of Scotland also offers a marine mortgage, including a 15 year marine mortgage.

Traditionally, marine mortgages have been restricted to a maximum period of 10 years. This new product from Lombard gives boat purchasers the benefit of even lower monthly payments, as the repayment of the capital is spread over a further 5 years.

As with Lombard's existing mortgages, there is a high level of flexibility with this product, with the option to make additional payments at any time without penalty. Additionally, the facility can be repaid in full after the first 12 month, also without penalty.

The 15-year marine mortgage follows the new Euro and US dollar mortgages, which have already been launched by Lombard. These facilities allow boat purchasers to take advantage of the lower base rates currently applicable in the US and Europe. These products will have great appeal to anyone who receives income in either of these currencies, as there is no exchange rate risk.

There is of course the option of a mix of options. Our approach was to share the ownership of the yacht with our parents. They contributed a cash lump sum. We borrowed with a combination of an overdraft, and a personal loan. That gave us the flexibility to repay the personal loan on a regular basis, and the overdraft as and when we could.

Most lenders offer online calculators which calculate the cost of your loan.

Boaters in the United States are fortunate to have a whole array of dealers, banks, credit unions and financial service companies available to arrange financing for their boat purchase. The National Marine Bankers Association (NMBA) is an organization that provides education and support to the marine lending community. Because these lenders specialise in boat loans, they understand the product and are likely to best serve your needs. When you begin your search for a marine lender, be certain they are an NMBA member. If you choose to finance through your dealer, be sure he knows you want your loan with an NMBA member.

Rather than make an anonymous application through the many online finance houses or broker services, we approached our local manager with the Clydesdale Bank. Having talked it through with him and he was able to offer a flexible package that suited our needs. Its called "relationship banking"!

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