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How to Get Preapproved for a Boat Loan

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Getting a boat lets you enjoy activities like fishing or a leisurely Sunday afternoon outing with family. As you prepare to realize your boating dreams, one of your first steps should be getting preapproved for a boat loan.

Read on to learn what you should expect during the preapproval process. We’ll explain how to get started, why getting preapproved is important and the types of loans you can choose. With that knowledge, you’ll soon be ready to head out on the water.

What You Need to Get Started

Each lender requires different financial information and documentation. However, the common items you need to get preapproval for a boat loan include:
  • Proof of identity — Your Social Security number and driver’s license are common ways to prove who you are.
  • Current debts — Make a record of your mortgage, car loan(s), student loans, or personal loans that you’re currently paying.
  • Proof of income — Document your salary with a W-2 form and recent tax returns.
  • Proof of employment — Use current pay stubs to verify your employment.
  • Other financial assets — Compile a list of savings accounts, stocks, bonds, real estate investments, bank statements, etc.
  • Down payment — Be prepared to cover a portion of the boat price. The amount depends on the lender, though you should be ready to offer up to 20% of the price.
Why Getting Preapproved for a Boat Loan is Important

Obtaining preapproval is an ideal first step before starting to shop for a boat. Being preapproved means that a lender has qualified you for a specific loan amount. The loan terms and interest rates vary among vendors. Therefore, you get the best deal by learning what you can get from a lender and choosing the best loan for you. Then you’ll know how much you can spend and shop for boats you can afford.

Understand Your Budget, Your Loan and the Purchase Price 

Boats can be expensive to maintain, so plan your budget accordingly. For example, your loan payment will be only part of what it costs to put your boat in the water. Don’t forget to factor in other costs like insurance, fuel, storage fees, and maintenance.

There are several types of loans that can finance a boat purchase. Here are some options to consider:

A Secured Loan: A secured loan is the type of loan where you borrow money that is backed by collateral, which means something of value, like a home, vehicle, or in this case a boat. If the borrower fails to make the payments, the collateral is used to recoup the loan.

The benefits that secured loans provide are: As the lender is taking on a lower risk loan because of the collateral, secured loans have lower rates. Another benefit is that those people who may not have a great credit history could access a secured loan.

An Unsecured Loan: The unsecured personal loan comes with some strings attached, but at least it doesn't require collateral. Unlike secured loans, unsecured loans have higher interest rates and more restrictions as the lender considers them riskier. In addition, it is much more difficult to get an unsecured loan than a secured one if your credit is not great.

The main benefits are: As it is an unsecured loan, your assets won't be used as collateral, and you receive the entire amount in your bank account once your loan request is approved. Then, like a cash buyer, you can negotiate with the boat dealer or private party.

Home Equity Loan: When looking into boat financing options, a Home Equity Loan is another option some people consider. With this loan you would use the equity in your home to fund the purchase of your boat. While this type of loan typically comes with lower rates, the risk is high as if you default the lender might be able to take your home.

Now that you have set your budget, understand your loan options and have a preapproval, you’re ready to shop for your dream boat and negotiate the purchase price.

Power Financial Credit Union Can Help

We can help you get into the water smoothly. Power Financial Credit Union offers recreational loans — including boat loans — with various loan repayment options to fit your needs. Our boat loans offer:
  • Financing options for your new or used boat, sailboat, or other vessel
  • Refinancing on your existing boat loan
  • Flexible repayment plans
  • Affordable rates
If you're a previous borrower with Power Financial Credit Union, you might also be eligible for an additional rate discount.

Setting Sail for Smooth Waters

If you’re ready to finance a new or used boat, get in touch with us. We can help navigate your loan options and make the process easier. Visit a local Power Financial Credit Union branch or call us today to talk with our boat loan experts.