How to Improve your Chances to Get a Yacht Loan
1.Getting a boat loan, used to be a bit easier than it is right now, however if you follow the tips in this list you should increase your chances to get a loan and be able to afford that boat.
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. 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 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. Banks take more than just credit score and income into the criteria they use to assess risk. Previous boat loan experience is a positive, or at least comparable borrowing experience. They will also look into your employment history, previous payment history, and cash reserves.
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 the right company to represent you. Only a few lending institutions provide boat loans, and most independent brokers will request a loan quote with each of them. This means that having two agents will not help you (and can often hurt your chances of getting a good loan). It is important that you select an agent or brokerage that has a long history of dealing with yacht loan lenders and a good track record of successful loans. Remember, a good broker is your advocate.
Now is a exceptional time to buy a yacht. There are ample opportunities to purchase yachts at that represent an exceptional value, or may have been previously unaffordable. Take the time to gather your documents, get “pre-qualified” for a yacht loan so you know that financing will not affect your negotiations or timetable to purchase.
