Boat loans? And interest charge?

I've just call the bank today asking why my loan doesn't seem to be falling much after each monthly payment.

The banker tell me, when I paid for example: $300, the bank takes their interest cut, the the boat dealer take thei intrest cut too! Then the rest goes into the loan ... Is there such a thing as "dealer interest cut"? (Two interest in one loan?)

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  • Dan B
    Lv 7
    7 years ago
    Best Answer

    A $20,000 boat at 8% for 7 years results in a monthly payment of about $300. About $175 of that goes toward the principal in the early years of the loan because you are using more of their money. As time progresses, near the end of the loan, almost all of the payment goes toward principal because you are still using their money, just less of it.

    If the lender wants to share their interest with the dealer, that's okay. You are still paying 8% interest on the note, not 16% (using my example figures). Sharing the interest is probably more common that some may think. That's probably why car dealerships try so hard to get customers to finance through them and steer them away from arranging their own financing. In my example above, interest is about $6100. If the dealer can get 20% of that money ($1200), that will pay maybe two weeks of wages or other overhead. When they sell a few boats a month, that can add up to big $$$ over a year's time.

  • 7 years ago

    I am surprised the banker told you this but yes they are correct. Many car and boat loans that are acquired through the dealer are participating loans. You are not actually paying double the interest but the interest is shared between the lender and dealer. All loans are Principle and interest that is it. In dealer arranged loans the dealer often participates in the loan by say only getting 80% of the funds due to them when the loan closes with that deal they earn a cut of the interest because they share the risk of non payment with the bank. It is a very common business practice

  • Anonymous
    7 years ago

    In the beginning of a loan, the payments are largely interest, and then in the end, largely principal. That's how it works.

    Try reading the loan docs. The interest is whatever you signed for.

  • Rob
    Lv 7
    7 years ago

    TWO greatest days in a boat owners life?

    when they buy it and when they sell it.

    read your contract as the one u got sound fishy.

    two interest sucking party on one loan is not normal.

    Source(s): ex boat owner
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  • elsie
    Lv 4
    3 years ago

    you want to extremely ask the monetary corporation and ask them to expose you on the settlement you're signing the position is says you could payoff the non-public loan early without consequences or costs or prepaid pastime.

  • 7 years ago

    You better have an intelligent adult look at those loan papers.

    Got it?

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