Long-term vs Short-term Boat Loan

Submitted by jig_fisher t3_10q4clx in personalfinance

Assuming interest rates are the same (from different loan sources), is there any harm in getting a longer term loan and paying it back on the same schedule as a shorter term loan?

Example:

$30,000 loan principal

- 60 month term; 7.5% interest; $601.14 monthly payment; $6068.31 interest paid over 60 months

- 120 month loan; 7.5% interest; $601.14 monthly payment; $6094.31 interest paid over 60 months

$600/month is very affordable for me and I've budgeted that amount into a separate account for a year to make sure.

I ask this because the boat dealer (very reputable, good reviews and word of mouth) only offers 10-year loans. I am travelling quite far to buy this boat so I'd prefer to work out the financing directly with the dealer. My reasons are my own so I'm really just asking advice on the numbers.

Thanks!

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kveggie1 t1_j6ns634 wrote

Boat loan?

Never. Save and pay cash.... 7.5%.... outrageous... 10 years.... outragoues.

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[deleted] t1_j6nu0kc wrote

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jig_fisher OP t1_j6nv56m wrote

My last boat saw 2-4 days a week of use during the fishing season. You're absolutely right about boat people, we'll spend what we have to to get out on the water. That's why I cheap out in other areas of my life.

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[deleted] t1_j6nw14c wrote

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jig_fisher OP t1_j6nzsxs wrote

Full send in process. Appreciate the advice and encouragement! I will be nowhere near drowning with a loan of that size.

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jig_fisher OP t1_j6nu1ag wrote

My greatest joy in this life is bass fishing, so I am 100% okay with financing a boat instead of waiting and letting the years slip by just to save and pay cash.

I paid off my last $25,000 boat in 2.5 years. My car and truck are paid off. My house payment is less than $1000. I save 20% of my income in retirement investment accounts. My emergency fund is 9 months of income.

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R0GERTHEALIEN t1_j6nqzja wrote

You'll want to check this with the dealership. Some loans have early repayment penalties. And if you do make early payments you may need to specify that the early payments are towards the principle, not just a early payment towards interest. No one here can answer this question, only the lender can answer specific questions about the loan.

But yes, I mean a longer term will end in more interest if you don't pay early, but it also gives you the benefit of reduced required monthly payments in the event your future financial position changes.

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WakeRider11 t1_j6nqvwb wrote

There is no difference. Some loans could have a penalty for early repayment, but I've really only seen that to prevent immediate repayment for when there is an incentive to finance a car purchase.

As a side note and coming from a financial planner/boat owner, financing a boat in general is not a good idea. Even a new boat tends to be a cash drain, and it only gets worse as you get several years into the life of a boat. But if you are a previous boat owner, you probably know what to expect.

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leadfoot9 t1_j6o7oou wrote

What's the best way to make a small fortune?

Start with a large fortune and buy a boat.

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