7 Ways to Improve your Chances to Qualify for a Boat Loan
A few years ago, getting a boat loan was quite easy, but is a difficult to qualify for a boat loan now. It’s not impossible, however. Here are a few tips to improve your chance to qualify.
1. Run your credit, with all three agencies. As Equifax, Experian, and Transunion may all come up with different results. You want to check to make sure that all the information is correct and that you opened every account that appears. If you find one that you didn’t open, you will need to submit forms to all three to dispute the creation of the accounts or the charges.
2. Improve your FICO score. Your FICO score measures you financial stability. You can improve your score by not using all of your credit space, and especially by having zero balance credit cards, paying your bills on time, and reducing the amount of debt you carry.
3. Put some “skin in the game.” Lenders like to see that you have financial motivation to keep from defaulting on the loan. By putting down 20%, the bank sees that you have a motivation to keep repaying the loan, and if you are able to put down more than 20% many times lenders will be able to give you better terms.
4. Understand the way that a bank looks at your history. Yes, a bank looks at credit scores and your down payment percentage, but they will also look into your job stability, cash reserves, previous payment history, and borrowing experience. This means that you should not expect a loan dramatically larger than anything you have gotten at before.
5. Put together the documents detailing your current financial position. This includes your year to date earnings, your last two years of tax returns, and your investments including cash, stocks, annuities, IRA’s, 401k’s etc. Also understand that you are not just proving you capacity to pay back the loan, but pay back the loan and take good care of the yacht, because if you default the bank will own the boat.
6. Know the debt to income rations that banks use to qualify loans. Banks do not usually loan to anyone who’s debt and expenses exceed 40% of their income.
7. Find a broker that you can trust and who has good relationships with banks. Having more than one agent or broker does not help you get a better loan, as most brokers can deal with all the banks that provide yacht loans (there are only a few). The main criteria you should use when determining a boat loan broker is your ability to trust them and their relationship with the banks.
Now is a great time to buy a boat. There are great opportunities to purchase boats at that represent an great value, or may have been previously unaffordable. Take the time to prepare in advance, get “pre-qualified” for a boat loan so you know that boat financing will not affect your negotiations or timetable to purchase.
Tags: boat loan, Lending, Lending, yacht loan
