Get pre-approved and take a big step toward buying your new boat. Boat Trader can help you find participating boat lenders in every state.
You will need to show the lender your financial ability to pay back a boat loan. Banks will look at your credit rating, so it’s important for you to look at it first. Three major bureaus provide this kind of information to lending institutions: Experian, Equifax and Trans Union. Start there.
It’s important for you to check your credit rating before the bank looks into it. Here’s why: If you find a problem or some inaccuracies, it’s much easier for you to get those straightened out before you apply for a loan.
Be sure there are no closed accounts that are being reported as open, and close any open accounts you don’t use anymore. By accessing your credit report first, you can stop problems before they start. There are lenders out there who will do subprime financing, which provides options for people with lower credit scores, but the national lenders will likely require credit scores to be 680 or higher. So, tidy things up before you begin.
Banks also look at your debt-to-income ratio, which is determined by dividing your monthly debt payments by your monthly income. Many lenders prefer a debt-to-income ratio of around 40 or 45 percent, including payment on the boat loan for which you are applying.
Lenders also will look at your net worth and liquidity. Your net worth is defined as assets minus liabilities – usually properties owned less any debt you have. A liquid asset is anything that can be turned into cash within 30 days or less.
Boat Down Payments And Ownership Costs
“Obviously, if you’re applying for a boat loan, you have to be able to show that you have the money to make the down payment, but also be able to pay for the expenses of owning a boat – whether that’s insurance, slip fees, fuel, all those things that go into boat ownership,” said David WV pawn shop Mann, membership program manager for Boat U.S., a boat owners association that connects lenders with buyers, among other services.
Boat down payments are usually between 10-20 percent, but can depend on the cost and value of the boat as well as your location and finances.
The boat loan rate for which you qualify is going to hinge on factors mentioned above, but it also could swing on the term of the loan – how many years you’ll be paying on it – or even the age of the boat you’re buying. For example, you might be able to get a better interest rate on a boat that’s as little as one year newer. In general, smaller loans for shorter terms usually have higher interest rates than larger loans for longer terms. Again, rates can vary with your credit history.
“First, we always say do your research. In marine lending, there’s a lot of disparity between lenders,” Mann said. “An individual might have a relationship with a local bank or credit union that might not necessarily know boats, but they do boat financing because they do car and RV and motorcycle loans. Sometimes it’s easier and faster to work with these local banks or credit unions, but it could also mean that your loan terms will be shorter. The national lenders, on the other hand, will finance boats in all 50 states and they often have a good understanding of boats. Be aware that their underwriting process can be a little bit more rigorous.”