You will need to show the lender your financial ability to pay back a boat loan. Banks will look at your credit rating, so it’s important for you to look at it first. Three major bureaus provide this kind of information to lending institutions: Experian, Equifax and Trans Union. Start there.
It’s important for you to check your credit rating before the bank looks into it. Here’s why: If you find a problem or some inaccuracies, it’s much easier for you to get those straightened out before you apply for a loan.
Be sure there are no closed accounts that are being reported as open, and close any open accounts you don’t use anymore. By accessing your credit report first, you can stop problems before they start. There are lenders out there who will do subprime financing, which provides options for people with lower credit scores, but the national lenders will likely require credit scores to be 680 or higher. So, tidy things up before you begin.
Banks also look at your debt-to-income ratio, which is determined by dividing your monthly debt payments by your monthly income. Many lenders prefer a debt-to-income ratio of around 40 or 45 percent, including payment on the boat loan for which you are applying.
Lenders also will look at your net worth and liquidity. Your net worth is defined as assets minus liabilities – usually properties owned less any debt you have. A liquid asset is anything that can be turned into cash within 30 days or less.