A boat loan is a type of installment loan used exclusively for financing a boat or similar marine craft. Boat loans operate similarly to auto loans and the application will likely mimic loan application processes.
However, boat loans are larger than most installment loans and therefore tend to be harder to get approved for. Before applying, it’s imperative that you know the ins-and-outs of the application process to increase your chances of approval.
1. Check your credit score
Boat loans often require a higher credit score than auto loans and most personal loans. It’s unlikely that you’ll get approved if you have a score under the very good-to-excellent range.
Your FICO credit score is the most popular scoring model and is often used by lenders in the application process. If you have a FICO score under 740, your chances of approval are likely to decrease. Every lender has different requirements, however, so check the specific criteria before settling on a lender.
How to check your credit score
There are multiple ways to check your score for free. For example, you have access to your credit report once a year for free on AnnualCreditReport.com. If you have a credit card, it’s likely that you’ll have access to your score and report for free as an added cardholder perk.
You can also purchase your score from the three credit bureaus – Equifax, Experian and TransUnion – for a minimal cost. At the end of the day, however, you choose to check your score isn’t going to impact your credit score and it’s important to keep up with it. Monitoring your credit will give you insight as to why your score is going up or down, which can help you improve your credit and increase your chances of getting approved for a boat loan.
2. Calculate how much you need to borrow
Before diving into any application, calculate down to the dollar amount how much you need to borrow including related expenses, like maintenance, insurance and marina fees.
Having a specific number will prevent you from over-borrowing. If you over-borrow, you’ll likely end up spending more than you originally borrowed due to the interest that accrues on the principal amount. It’s also important to know how much you need as every lender has different requirements and the maximum amounts you can borrow.
You can do this by taking a close look at your budget, assets and financial health and also by using a loan calculator. A loan calculator helps you determine a potential repayment timeline and monthly payment based on the predicted loan details.
3. Prequalify and compare lenders
Prequalifying is an option that’s offered by most online lenders and banks; it allows you to check your eligibility odds and predicted rates with no impact on your score. That being said, if the institution offers prequalification, there are very few situations where you shouldn’t take advantage of this benefit before applying.
Prequalify with at least 2 lenders and then compare the offers to more easily find the lender that’s best for you and your credit situation. If you end up with similar rate offers, dig into each lender’s benefits or perks to deduce which option will benefit you.
When looking at the lender websites, be on the lookout for perks like interest rate discounts for enrolling in autopay, exclusive financial resources and guides or tailored customer service experiences for its members.
4. Gather the required documentation
When applying for a loan, starting the application and then realizing that you don’t have the required documentation on hand can be one of the most frustrating borrower experiences.
Most lenders boast same-day funding and quick application processes; however, it won’t be an easy process if you don’t know exactly what you need beforehand. As a rule of thumb, have your income documentation on hand, a form of ID and your Social Security number on deck.
Much like with credit scores, every lender will have different requirements so read the criteria carefully before starting the application.
You can apply on the institution’s website or in person if there are brick-and-mortar locations near you. Once you complete the application, you may be notified of your status that same day or it could take a few business days, depending on the lender.
Once you’re approved, the lender will reach out to you with disbursement information and when you can expect the funds to hit your bank account. Some companies pride themselves on their exceptional customer service and may provide you with a personal representative to guide you through the process.
This article originally appeared here and was republished with permission.