Qualifications for a Boat Loan

By Monica Link

Requirements for a boat loan are different than the requirements for other types of loans. Unlike an auto or home loan, financial institutions require a heightened level of requirements before approving a loan for a boat. The main requirements include credit, income and down payment and the ability to repay the loan.

Credit requirements are strict for boat loans. According to boating information site Three Sheets Northwest, credit requirements for a boat loan include a Fair Issacs and Company (FICO) credit score in the mid 600s or above. Like other types of loans, lenders review the borrowers debt-to-income ratio. When traditional lenders deny borrowers for boat loans there are subprime lenders who may approve a loan for a boat. Since each applicant and case is different, a subprime lender or a lender that specializes in bad credit loans may charge a higher interest rate, and require a larger down payment. The lender may also enforce limits on the loan amount and threaten repossession of the boat if payments are regularly missed or late.

The income requirements on the average boat loan depends on the amount of the boat and the buyers net worth. For example, a borrower applying for a boat loan for $75,000 must have a net income of twice the amount of the boat loan. This means that the potential borrower should have a net worth of $150,000. Real estate owned can be included in the totals of a borrower's assets.

Repayment ability is a major issue in the requirements to obtain a boat loan. The type of vessel or boat is considered in this part of the criteria. For example, it may be slightly more difficult to get financing for an older boat due to the possibility of the boat malfunctioning and limiting the ability for the loan to be re-payed. Banks and financial institutions will repossess a boat if the payments are delinquent. When considering the borrower's ability to repay, the bank will assess the risk based on the previously mentioned criteria. Banks will also consider the possibility of repossession since a boat that is repossessed is a financial loss for the bank.

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