If you’re looking at purchasing a boat, there are a couple of options you could go with. These are spending cash or getting a loan from a lender. One big issue that many people face when trying to secure a boat loan is their credit score. Below I explain exactly all you need to know about getting a boat loan with whatever credit score you may have.
You will most likely need to have a credit score of 700 or more in order to receive an ideal boat loan from a good lender. If your credit is lower than that you may have to pay a higher interest rate or a higher down payment, but there are many other factors that could still get you a good loan.
Your credit score isn’t everything that lenders look at when deciding if you’re a good candidate for a boat loan. If you have a good debt to income ratio (DTI) (click here to find out how to calculate your DTI), the ability to pay a large down payment, and a co-signer, you may still be able to get the boat loan you want even with a subpar credit score
What’s the lowest you’re credit score can be in order to get a boat loan?
Few boat loan lenders will accept anything under a credit score of 500, but you will probably need a 600 or higher credit score in order to get a reasonable interest rate and loan term. This is because lenders see you as a higher risk than those with a higher credit score, therefore giving you a worst deal on the loan.
So if you do want a boat loan and you have low credit, make sure to shop around a bit in order to find which lender is offering the lowest interest rates. Click here to see what is considered a bad interest rate for a boat loan.
Tips to secure a good boat loan with a low credit score
Lenders look at much more than just credit scores. So in order to get the loan you want, try and follow these tips below:
- Add a co-signer to the loan who has a good credit score. This could be your mom, spouse, uncle, or whoever has a good credit score and is willing to sign. Even if you don’t need one, having a co-signer could lower your interest rate so you might as well do it if your lender allows it.
- Pay off your other debts to lower your debt to income ratio (DTI). Student loans, business loans, car payments, and more all are other debts that boat loan lenders may not like. Most lenders will want your DTI to be under 43% but if you have a low credit score it may have to be down in the 20 or 30 percent range.
- Pay more on the down payment. A bigger down payment will give boat loan lenders more confidence in you as a customer because they know you have a lot of liquid cash. Also, you could lower your term length saving you money on interest and giving less risk to the lenders.
- Get a secured loan. A secured loan is when you offer the lender a collateral in case you don’t pay off your debt to them. This could be your car, home, bonds, stocks, etc. The lender will hold the deed or title until the loan is fully paid. The downside is you are putting the collateral at risk if you don’t pay off your loan.
- Get a home equity loan. This is similar to a secured loan, but if you own your home, you can use the equity you have in it to get a loan with a much lower interest rate than if you were to get a boat loan. Just like secure loans though, you are putting your home at risk if you don’t make the payments.
- Compare all the different boat lenders. Although you may have a low credit score, many times some lenders will still give you a decent deal. This is why shopping around to find whoever will give you the best deal is a great way to save a whole lot of money.
- Fix your credit score. This one is kind of an obvious one, but there are plenty of ways you can raise your credit in a short amount of time. This article here from nerdwallet tells you exactly how to do that.
What is a good interest rate and what is a bad interest rate for a boat loan?
A good interest rate (or annual percentage rate) for a boat loan is 3.5-6 percent, and a bad interest rate is over 20 percent. Although an interest rate may be considered bad, it could still be fair because of your low credit, low DTI, an old boat, etc. This is why I am trying to stress the importance of shopping around in order to find the lowest interest rate loan you can find.
If you click here, it will bring you to a list of some lenders I have found that may give you decent interest rates even if you have a low credit score.
What lenders will give you a boat loan even if you have a poor credit score?
Many lenders have credit score caps and won’t even let you apply for a loan if you don’t reach their cap (usually it’s around 700). If you don’t reach that cap, below is a list of some lenders to check out. Remember even if you do get approved, make sure you can for sure pay your monthly bill.
- Southeast Financial: No credit score requirement
- My Financing USA: 550 credit score requirement
- Sea Dream: 550 credit score requirement
- One Main Financial: 600+ credit score recommended
Many of these lenders will still give high-interest rates so make sure you do research before you make a decision. Just because you can afford a boat loan, it doesn’t mean you should always do it because a lot of the money might just go to the lender and not towards your boat.
What is considered a bad boat loan?
A bad boat loan is if you are paying for more interest than what is fair for you to be paying. For example, if you had a credit score of 750 and a reasonable DTI, but you were paying a 15% interest rate that would probably be a bad loan.
To make sure you are not getting a bad boat loan, make sure to compare what interest rates you can get with a handful of lenders.
Does applying for a boat loan hurt your credit score?
Most of the time it will not hurt your credit to apply for a boat loan unless they are taking a hard pull of your credit and not a soft pull. A hard pull can negatively affect your credit score especially if you don’t end up securing that loan. So make sure to only let lenders do a soft pull unless you are sure you are going to be able to get a loan from a lender doing a hard pull.
How much will your monthly payment be for your boat loan?
If you know your interest rate, loan term length, and boat loan amount you can use this calculator in order to find out how much your monthly payments will be. This is a great way to make sure you can afford the actual cost of your loan.
How much can you afford to pay per month on a boat loan?
Not everyone can afford the same amount of boat, so making sure you know your budget is important so you don’t get screwed over with a loan you cant actually afford. If you want to find out how much boat you can afford, check out this article I wrote where I have a calculator that shows you exactly how much you can afford.