Boat Loan Calculator Step By Step Guide With Examples

Boat Loan Calculator

A Boat Loan is similar to a vehicle loan wherein the purchaser can make a down payment and pay the rest of the amount through a loan, and this calculator will exactly let you know the amount of installment to be paid by the purchaser.

About Boat Loan Calculator

The formula for calculating Boat Loan is as below:

Boat Loan Calculator

(L * r (1+r)nF )/ ((1+r)n*F-1)

L is the Amount borrowed.
r is the interest rate per annum.
n is the number of periods for a loan will be outstanding.
F is the frequency wherein the loan amount is to be repaid.

(L * r * (1+r)nF )/ ((1+r)nF-1)

Wherein,

L is the Amount borrowedr is the interest rate per annumn is the number of periods for which a loan will be outstandingF is the frequency wherein the loan amount is to be repaid

One of the major investments ones can make is a boat. For example, in the United States, a 22-foot sailboat can cost around $25,000; further, the cost can also vary across a choice of boat. Further, one needs to fully understand how the boat’s cost works along with the cost of keeping it. Other costs are associated with a boat like the initial taxes applicable on the same, mooring fees, fuel cost, winter storage fees (if applicable), etc. Insurance could also be an added cost. Hence, one should do deep research on the same before buying the boat, and most of them can also be financed by the bank. One can make an initial down payment as per their capability and get the rest of the price financed by the bank. Again, banks provide finance based on the credit rating applicable to them, so one needs to maintain their credit score.

How to Calculate a Boat Loan Installment?

One needs to follow the steps below to calculate the boat loan installment amounts.

Step #1 – Firstly, determine the boat that one wants to purchase and the price of the same along with the percentage of the loan that the bank will finance, and the same would be the loan amount.

Step #2 – One must multiply the loan amount by the applicable interest rate.

Step #3 – Compound the periodical interest rate by the interest payout frequency.

Step #4 – Discount the value arrived in step 3 by following (per given in the formula).

Step #5 – After entering the above formula, one will get the installment amount that shall be repaid for the Boat Loan borrowed.

Examples

Example #1

Mr. Tim, a Delaware resident, wants to buy a motorboat costing around $35,000. On inquiry with the dealer, Mr. Tim knew he would also be liable to pay taxes and insurance. The cost of insurance will be 5% of the cost, and the taxes applicable would be 7% of the cost price. Since he doesn’t have that many funds, he decides to borrow a loan from the bank. The bank is financing him 90% of the total cost of the boat, and the rest will be paid by him upfront to the dealer. He chooses installment for 36 months as equal installment. The Interest rate the bank charges is 10%, and there are 2% upfront processing charges on the sanctioned amount.

Based on the above information, you must calculate the monthly installment amount of the boat loan and the total interest outflow.

Solution:

We need to calculate the cost price of the boat.

We need the loan amount, which will be 39,200 *90%, which is 35,280.00. There is 2% of the Processing fees of the sanctioned loan amount, which will be paid upfront, which is $705.60. Lastly, the down paymentDown PaymentDown payment is the initial deposit made by the buyer to the seller when purchasing an expensive item, such as residential property or a car. It comprises a portion of the total purchase amount of the asset and takes place via cash, bank check, credit card, or online banking. read more by Mr. Tim will be 39,200 – 35,280.00, which is $3,920.00, which is 10% of the cost price.

The loan period repayment is 24 equally installments, and further, the interest rate is 10.00% fixed, which shall be compounded monthly, which is 10.00%/12, which is 0.83%.

Now we shall use the below formula to calculate the EMI amount.

= ($35,280.00 * 0.83% * (1 + 0.83%)^36 ) / ( (1 + 0.83%)^36 – 1 )= $1,138.39

Therefore, the installment amount for Mr. Tim for the next three years on the loan amount of $35,280 shall be $1,138.39, and when multiplied same with 36, the total amount repaid will be $40,981.91, less $35,280.00, which equals to $5,701.91 and total cash outflow due to a loan will be $5,701.91 + $705.60 which is $6,407.51.

Example #2

Mrs. Pooja is seeking to purchase a new boat and is looking for the same to be financed by a bank. The total cost of the vehicle is $40,8000, which includes all. The Bank will grant a loan of 80%, and she will repay the rest upfront. However, she is unsure what tenure she would choose as her goal is to keep her monthly cash outflow lower than $1,300, and she is not ready to pay any cumulative interest amount throughout the loan period of more than $8,000. The interest rate that the bank shall charge her will be 11.00%. The Bank can grant her a repayment period of either 36 months or 48 months.

Based on the given information, you must advise Mrs. Pooja as to what she should do?

We need to calculate the installment amount that will be paid monthly; for that, first, we need to know the amount of the loan, which is $40,800 * 80%, which is $32,640.00. The interest rate given is 11.00% fixed, and it compounded monthly that will be 11%/12, which is 0.92%.

Use the formula below to calculate the installment amount for 36 months.

= ($32,640 * 0.92% * (1 + 0.92%)^36) / ( (1 + 0.92%)^36 – 1 )= $1,068.59

Total interest outflow will be equal to ($1,068.59 * 36) – $32,640 which is $5,829.30.

Again, using the same formula, we will calculate the installment amount for 4 years, which is 48 months.

= ($32,640 * 0.92% *(1 + 0.92%)^48) / ( (1 + 0.92%)^48 – 1)= $843.60

Total interest outgo equals to ($843.60 * 48) – $32,640 which is $7,852.70

Advice: Since her preference is not to pay cumulative interest of more than $8,000 in the entire loan duration and for that, both are meeting her requirements and her second requirement is that the installment amount should be lower and not more than $1,500, which only second option is preferable, and she should opt for 48 months.

Conclusion

Boat loans need to be designed so that total outflow is not that big since the cost of the same is already huge. Boat involves a lot of expenses after acquiring them like fuel expenses, storage expenses, etc., and hence one should try to keep the finance costThe Finance CostFinancing costs refer to interest payments and other expenses incurred by the company for the operations and working management. An enterprise often borrows money from different financing sources to run their operations in return for interest payments and capital gains.read more as low as possible.