How to qualify for a boat loan


If your dream of owning a boat seems financially out of reach, you may be considering a boat loan. In 2022, a boat can cost anywhere from $10,000 for a small used boat to hundreds of thousands of dollars. Considering the average American’s pre-tax income was around $84,000 per year in 2020, there might not be much room in your budget.

A boat loan can help you make your dream boat purchase a reality, but you need to have all your ducks in a row to benefit from it. Applying for a boat loan requires being organized and demonstrating financial stability.

Types of boat loan

When shopping for a boat loan, consider the different types of loans available. Most lenders offer both secured boat loans and unsecured boat loan options.

Guaranteed boat loans

A secured loan is a loan that is secured by collateral. The item used as collateral can be repossessed by the lender if you miss payments or make late payments on the loan. Examples of collateral include a home or a vehicle. In the case of a boat loan, the boat itself can serve as collateral.

Unsecured Boat Loans

Unsecured loans do not require any collateral. However, this means that they generally have higher interest rates and less favorable terms for borrowers. The advantage of unsecured loans is that you do not risk seizing collateral if you make a late payment. An unsecured loan can be a personal loan from a bank or online lender or a peer-to-peer loan.

How qualification changes across lenders

There are many lenders offering different loan deals. Each type of lender and loan requires a specific set of qualifying factors to lend you money. The type of loan you choose and the lender administering it will determine everything you need to qualify for the loan.

For example, LendingClub, a peer-to-peer lender, requires you to be 18 years old, have an existing US bank account, and have a good credit history to qualify for one of their personal loans. On the other hand, applicants must know which boat they plan to purchase, among other common loan requirements, to qualify for a boat loan from US Bank.

How to benefit from a boat loan

Applying for a loan of any type requires you to meet certain qualifications. Lenders want to be sure that you will repay your loan within the agreed time frame. Lenders need to be sure that the collateral is worth what you say it is worth if it is a secured loan.

Prequalification allows you to give a lender your basic information before formally applying for a loan to find out if you will qualify. This is not a guarantee that you will be approved for a loan, but it can help you determine if you miss any loan requirements before applying.

To apply for a loan, lenders will need to ensure that you meet their requirements and you will need to provide documentation to prove this. These are the most common requirements when applying for a boat loan.

US citizenship or valid visa

Any US lender wants to see that you are a US citizen or lawful permanent resident. You will need to provide proof of this with some form of identification. Commonly accepted identification types include:

  • Birth certificate
  • Citizenship certificate
  • Driving license
  • Military ID Card
  • Passport
  • social security card
  • State-issued ID

Functional bank account

Although it’s not impossible to get a loan without a bank account, most lenders will require you to have a bank account to apply for a loan. Your bank account and bank statement are used to verify your income and expenses. Your lender may also deposit funds directly into your bank account when they approve you for a loan.

Good credit score

Lenders generally consider a FICO credit score of 680 or higher to be good, but credit score requirements may vary from lender to lender. They also want to make sure you haven’t had any major credit issues in the past three to five years, such as trouble repaying a loan, bankruptcy, or foreclosure.

If you are unsure of your credit score, you can pay any major credit bureau for your credit report. You may be able to find out your credit score for free if you have a credit card where this service is an included benefit. Experian also offers a free credit monitoring option if you sign up for their emails.

Consistent work history

When you apply for a loan, lenders want to see that you have a reliable job. This gives them confidence that you will be able to make payments on your loan. You must submit proof of income such as a recent tax return or pay stubs to show that you are employed.

Sufficient income

Your tax returns and pay stubs also allow lenders to see your total income. They consider all types of income to calculate your total income and determine how much money they will lend you. This includes your employment income, as well as government benefits, child support, and alimony.

Leverage ratio required

The debt-to-income ratio (DTI) compares your monthly income to recurring payments. You can calculate DTI by adding up all your monthly payments and dividing them by your total monthly income, or you can use a DTI calculator. Lenders generally consider 36% or less to be a favorable DTI. However, some lenders will give you a loan even if you have a higher DTI percentage.

marine survey report

When lenders give you money for a boat, they want to make sure they know the value of the boat. A boat loan often requires a maritime survey report which assesses the value of the boat (much like a survey report gives the value of a house).

At the end of the line

Buying a boat means more fun in your future, but boats are very expensive. Applying for a boat loan can give you the financial help you need to finance your marine dreams. Before applying for a loan, take stock of your finances to make sure you qualify. You will also want to talk to several lenders to find the best terms and rates for a boat loan.

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