What type of credit do you really need for boat financing?
Buying a boat or a yacht is a very exciting step whether you‘re looking at purchasing your first center console, upgrading to a bigger yacht, or finally purchasing the boat you have always dreamed of. One of the most common questions prospective buyers ask during the financing process is:
What credit score do I need?
Fortunately, there are financing options for all credit types. Most lenders view a number of factors, not just one, to determine how you will receive a quote. Here at Shelter Island Funding we can show borrowers what lenders are looking for in order to be approved on marine loans and yacht finance.
Why Credit Matters in Boat Financing
Your credit profile helps lenders determine:
Your capacity to repay the loan.
Overall financial stability
Level of risk related to the funding application
Your capacity to repay the loan.
Overall financial stability
Level of risk related to the funding application
Just like automotive or mortgage lending,
higher credit scores generally create access to:
Reduction in interest rates
Longer periods of lending.
Lower monthly payments
Rising loan amounts
Reduction in interest rates
Longer periods of lending.
Lower monthly payments
Rising loan amounts
Typical Credit Score Ranges for Boat Financing
While all lenders have their own specific criteria, most marine loan
approvals are divided into the following broad criteria:
740+ Credit Score
Buyers in this range often qualify for:
1. The highest best rates
2. Adding longer terms to the loan.
3. Acceptance of areas of the market where a higher loan to value would be needed.
4. Lower down payments in these areas.
5. Smoother approval over bigger yachts
1. The highest best rates
2. Adding longer terms to the loan.
3. Acceptance of areas of the market where a higher loan to value would be needed.
4. Lower down payments in these areas.
5. Smoother approval over bigger yachts
Personal Guarantees Are Still Required
680–739 Credit Score
This range continues to be viewed extremely positively by
many lenders. These buyers may qualify for:
1. Competitive finance schemes
2. Strong Term of repayment
3. Broad market acceptance where higher loan to values are required
1. Competitive finance schemes
2. Strong Term of repayment
3. Broad market acceptance where higher loan to values are required
620–679 Credit Score
Financing may still be available depending on:
1. Income
2. Debt to Income Ratio
3. Level of downpayment (amount)
4. Liquid financial assets
5. Type and age of vessel.
1. Income
2. Debt to Income Ratio
3. Level of downpayment (amount)
4. Liquid financial assets
5. Type and age of vessel.
Further documentation can be required if needed.
Below 620 Credit Score
The approval process will become increasingly situation specific but there can be significant financing opportunities on some circumstances.
Factors that may help include:
1. High income
2. Large deposit
3. Addition of a Co-borrower
4. Collateral of value
5. Recent clean payment history
1. High income
2. Large deposit
3. Addition of a Co-borrower
4. Collateral of value
5. Recent clean payment history
Credit Score Is Only One Piece of the Puzzle
A common misconception of yacht financing is that approval is solely based on credit score.
In reality, lenders often review:
The amount and stability of one‘s income and employment.
Old debts to be paid back
Cash reserves
Down payment amount
Vessel type
Age of the boat or yacht
Amount of loan being requested
The amount and stability of one‘s income and employment.
Old debts to be paid back
Cash reserves
Down payment amount
Vessel type
Age of the boat or yacht
Amount of loan being requested
A buyer with a good score and financial standing may sometimes put in a better application form compared to someone who has a very high score, but also has too many open debts.
Does Type of Boat Matter?
Yes. The boat itself can be a factor in funding.
Lenders may evaluate:
Age of the vessel
Condition
Producers reputation
Type of intended use for the vessel
Cost of the purchase
Survey results for older vessels
Age of the vessel
Condition
Producers reputation
Type of intended use for the vessel
Cost of the purchase
Survey results for older vessels
How to Improve Your Chances of Approval
If you intend to finance a boat or yacht, there are a
number of areas which can help your application.
1. Reduce Existing Debt
Reduction in monthly payments and credit card balances can improve debt-to-income ratios.
2. Increase Your Down Payment
A larger down payment could increase approval chances and lower monthly payments.
3. Avoid Large Credit Changes Before Applying
Significant purchases, new loans, or numerous hard credit inquiries may have a temporary impact on your credit profile.
4. Keep Financial Documents Organized
Lenders may request: Tax returns, Bank statements, Income documentation, and Asset documentation. They may also want to know how, when and where are you storing documentation?
1. Reduce Existing Debt
Reduction in monthly payments and credit card balances can improve debt-to-income ratios.
2. Increase Your Down Payment
A larger down payment could increase approval chances and lower monthly payments.
3. Avoid Large Credit Changes Before Applying
Significant purchases, new loans, or numerous hard credit inquiries may have a temporary impact on your credit profile.
4. Keep Financial Documents Organized
Lenders may request: Tax returns, Bank statements, Income documentation, and Asset documentation. They may also want to know how, when and where are you storing documentation?
Getting them ready can tend to make the approval process go a lot faster.
Pre-Approval Can Simplify the Buying Process
Numerous buyers often opt to obtain pre-approval for financing prior to looking for a boat.
Benefits include:
Realistic budget ranges
Faster closing periods
Bargaining position against sellers is better
Greater confidence during the buying process
Realistic budget ranges
Faster closing periods
Bargaining position against sellers is better
Greater confidence during the buying process
Pre-approval on competitive yacht purchase can be crucial.
Final Thoughts
Marine loan financing is seldom a one size fits all. Though credit score is a factor, every finance institution has its own opinion when it comes to considering the whole financial picture of a marine loan application.
No matter if you are shopping for your first fishing boat or stepping up to a luxury motor yacht, or just looking to upgrade to a bigger vessel, learning how they look at buying on finance can make the process easier for you.
At Shelter Island Funding, we partner with the best marine professionals dedicated to assisting buyers from all financial backgrounds through the marine financing process clearly and confidently.
If you are considering purchasing a boat or yacht, then it is never too early to consult an experienced marine lender to get you on the right track.