Wed 25th Nov, 2009
7 Ways to Improve your Chances to Qualify for a Boat Loan
1.Two years ago getting a boat loan was substantially easier than it is now, however is is not impossible to get one now. Following these seven tips should increase your chances at qualifying and getting your dream yacht.
2. Check your credit score with all three agencies: Equifax, Experian, and Transunion (Each agency will give you a different score, and may even find different accounts). It is important that you run each one and check for accounts that you did not open or charges that you did not generate. If you find any you will need to dispute them with all three agencies.
2. Focus on your FICO score, which is the measurement of your financial stability and your ability to repay the loan. You can improve your score by paying down debt, having accounts with zero balances, and always paying your bills on time.
3. Put at least 30% down. By putting down a larger down payment, you show a bank that you have a financial commitment to the purchase and also have “skin in the game.” If you are able to put more than 20% down, you might even be able to negotiate better rates.
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. Gather your financial documents. In order to qualify for a loan, a lender will want to verify that you have the means to both pay back the loan and take care of the boat, including maintenance, insurance, dockage, and fuel, while you own it. In order to prove your financial status, you will need to provide the lender with two years of tax returns, current year to date income, and a balance sheet of current investments, cash, stocks, annuities, IRA’s, 401k’s, etc. Also, remember that many lenders will require you to insure the boat until you have paid off the loan, even if your state does not require insurance.
6. Understand how bank look at your debt and income. A bank will want to see that your monthly debt payments are not greater than 40% of your monthly earnings.
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 yacht. There are tremendous opportunities to purchase yachts at that represent an tremendous value, or may have been previously unaffordable. Take the time to prepare in advance, get “pre-qualified” for a yacht loan so you know that financing will not affect your negotiations or timetable to purchase.