- 09
- Nov
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. Understand how you FICO score is calculated. A FICO score can be improved by paying your bills on time, reducing your debt, and having ample credit space, especially zero balance accounts. A FICO score is the measurement of your financial stability.
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. Know your history. A bank will look at your credit score, and commitment to the loan by looking at the amount of your down payment, but they will also consider the rest of your history, including employment history, loan payment history, cash reserves, and the size of any previous loans. Banks hardly lend a significantly larger loan than the other loans you may have had in the past.
5. Get ready to prove your financial position. Because a yacht loan lender might end up owning your boat (if you default), they will want to know that you have the income to not only pay back the loan, but also take care of the boat, including maintenance and insurance. You will need to provide proof of YTD earnings, two years of tax returns, and a listing of all investments (including retirement accounts).
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. Choose the right representative. A yacht loan broker is an independent advocate that can connect you with every bank that provides boat loans (not all do), the criteria you should use when choosing your broker should be if they have a long standing, strong relationship with the banks.
Now is a great time to buy a yacht. There are tremendous opportunities to purchase yachts at that represent an exceptional 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 yacht financing will not affect your negotiations or timetable to purchase.
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