The Easy-To-Follow Steps That Will Help You Qualify for a Boat Loan
Buying your own boat is a big commitment but could also be the most exciting purchase you ever make. In the past, boats were only available to the super-rich, but now with specialist boat loans, people with every budget can now afford to buy one. Qualifying for a boat loan is a relatively simple process but requires you to provide evidence of how much you earn each month and how much you owe. Based on this information, a boat loan lender will decide whether lending you the money is a good investment for them.
To help get you started, here are the easy-to-follow steps that will help you qualify for a boat loan.
1. Calculate Your Credit Score
The first thing you will need to do in order to qualify for a bot loan is to work out your credit profile status. You can do this by getting copies of your credit scores from the three credit bureaus (Equifax, Experian, and TransUnion). These three bureaus are used in marine lending to determine whether someone is a good candidate for a boat loan. The information on the three bureaus may not be the same as each uses a different process for calculating your credit score. Because of these discrepancies, boat loan lenders pay more attention to the information in the reports than to the scores themselves. This information may include how long you have owed the money for, the regularity of payments, the presence of revolving debt, and various other factors.
2. Work on Your Credit Rating
If the information provided by the three credit bureaus is not great, you may initially get rejected for a boat loan. If this is the case, you will need to work on your credit rating to show potential lenders that you are taking steps to improve it. Lenders will be willing to approve your loan if you show that you will be a responsible borrower despite your below-par credit history. Once you can prove that your credit rating is on the way up, you can go ahead and apply for a loan. It may be accepted or you may be told you need to work on it some more, but at least you will know where you stand.
3. Take Out Other Loans or Secure a Guarantor
One of the best ways to improve your credit rating in the eyes of marine lenders is to take out similar loans and then pay them back without missing any payments. This could be a car loan or a mortgage on a property, and it will show a boat loan lender that you can be trusted to pay back any money which they lend you. If this is not a feasible option for you, you could use a co-applicant to act as a guarantor for the loan. This could be a spouse or a parent with a strong credit rating who will become eligible for loan repayments if you fail to pay the money back.
4. Calculate Your Debt to Income Ratio
Once your credit rating has been cleared as acceptable by a lender, they will then your debt to income ratio (DTI). This ratio is calculated using your monthly debt and gross monthly income.
If your monthly debt is $3,000 and your monthly income is $9,000, your DTI is calculated by dividing 3,000 by 9,000 giving you a DTI of 33.3%. The usual standard for boat loan eligibility is a DTI of less than 50% so this person would probably be approved for the loan.
5. Consider Monthly Boat Loan Repayments
It is important to note that potential boat repayments are factored into your monthly debt. The repayments on a $100,000 boat may push your DTI above 50% while a $75,000 boat will allow you to stay under the threshold. Once you already own the boat, you may find that you would like to reduce the monthly repayments. You can do this through boat refinancing which will give you more wiggle room with your money. If you do decide to do this, just make sure that the fees you may have to pay don’t end up costing you more in the long run.
Buying a boat is the perfect way to enjoy the open ocean with your loved ones. In the past, this opportunity was only available to the wealthiest people, but now this dream is a possibility for everyone. Make sure that your credit rating is in good order and that your DTI is at a stage where you can actually afford the boat. Follow these easy steps and you will have everything you need to purchase your dream boat.