YachtCloser Financial

About Boat Loans

Who should help me with my boat loan?

A lender who is experienced with boat loans.  This is why we've partnered with Sebrite Corporation, a leader in recreational marine and RV financing for over 40 years.

Boat loans have their own nuances and borrowing processes. While typical lenders will make loans on many types of assets, including boats, you’ll want someone who has done this many times before.

What documents are typically needed to apply for a boat loan?

Lenders will require a lot of documentation depending on the amount of the loan. Frequently requested documents include:

-       income verification docs (e.g. tax returns and W-2’s)

-       asset verification docs (e.g. bank statements)

-       driver’s license or passport

-       Coast Guard Documentation of a vessel (generally for boats 26’ and larger)

This should go without saying, but it's important to provide complete and accurate information to help facilitate the loan process.

It’s possible that you’ll also need to prepare a personal financial statement. This is simply a snapshot of your assets and liabilities in a given moment of time to calculate your net worth.

You’ll also need as much information about the boat as possible, including year, make, model, power, optional equipment and any upgrades. If you have not yet chosen a boat and are looking for pre-approval, the lender will likely ask you for your best guess of what you plan to buy and how much you’re planning on borrowing.

How important is my financial history in being approved for a boat loan?

When deciding whether to make a loan, the underwriter will investigate your financial history and current financial condition. Possible things that they’ll look into:

-       credit history

-       satisfactory payment of current and previous credit obligations

-       previous loans that have been successfully paid off

-       level of revolving debt (e.g. credit cards)

-       debt-to-income ratio

-       net worth

The underwriter will also need to verify information about the boat. When buying a used boat, this sometimes includes getting the boat surveyed by a licensed marine surveyor, much like getting an appraisal before buying a home.

 

Glossary of Terms

APR

“Annual percentage rate”, or the annual cost of borrowing money, expressed as a yearly rate over the life of the loan.

Coast Guard Documentation of a Vessel

This is required by most lenders for boats that are generally 26' and larger. This allows the bank to secure its lien on the federal level. This is beneficial to you because it allows a title search to be done before you buy the boat, ensuring that the title is free and clear and that liens encumber the boat.  To learn more about vessel documentation, YachtCloser Documentation.

Condition and Value Survey Report

A report done by a licensed surveyor which details the current condition of a boat and estimates its value.

The surveyor will complete a thorough visual inspection of the boat you intend to purchase. Some non-destructive testing, such as sounding the laminate with a hammer or testing with a moisture meter, may be included.

The survey report will cover the areas inspected and include recommendations regarding problem areas. It will also include a current market value estimate.

Credit Score

A credit score is a number from 300-850 that’s calculated based on one’s financial history. It’s used by lenders to determine the likelihood of whether someone will repay a loan.

Debt-to-income ratio

The ratio of all your monthly debt obligations (e.g. mortgage, car payments, credit card debt, etc.) compared to your monthly income. This is used by lenders to help determine your ability to take on additional debt.

Escrow account

An escrow account is where the assets of a transaction are held by a third party (usually an escrow company) until all of the transacting parties agree that the terms of the transaction have been met. At that point the third party releases the assets from the escrow account to their respectives parties

NADA

Stands for “National Automobile Dealers Association” but is now one the largest databases of boat prices (http://www.nadaguides.com/Boats).

Net worth

All of your assets (your home, cars, 401(k)’s, businesses, etc.) minus all your liabilities (mortgage, car loans, boat loans, etc.)

Revolving debt

Debt that you don’t need to renew. E.g. credit cards or overdraft protection

Sea Trial or Trail Run

On a sea trial or trial run, the surveyor has the opportunity to evaluate the engine and overall performance, but also to test the steering, controls, shafting, engine mounts and exhaust systems as well.  

Underwriter

The person or company who determines whether to make a loan, and at what terms.