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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 to get pre-approved for a boat loan.

Read on to learn what you should expect during the pre-approval process. We’ll explain how to get started, why getting pre-approved is crucial, and the types of loans you can choose. You’ll soon be ready to head out on the water, confident in your financing decision.

What you need to get started...

Each lender requires different financial information and documentation. However, the standard items you need to get pre-approval for a boat loan include the following:
  • Proof of identity — Your Social Security number and driver's license are common ways to prove who you are.
  • Current debts — Record 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 work.
  • 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 get pre-approved for a boat loan?

Obtaining pre-approval is an ideal first step before shopping for a boat; being pre-approved 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 borrow from a lender and choosing the best loan. This allows you to understand how much you can spend and shop for boats you can afford.

It is simple to get pre-approved for a boat loan and usually only takes a few minutes to complete the application. You can apply for a recreational loan online, and you’ll typically receive an answer within a few days (if not sooner). This information lets you know you’re getting the best financing possible, making the shopping process more enjoyable.

New vs. used boats

Purchasing a new or used boat is entirely up to you, your needs, and your budget options. Financing is available for both pre-owned and new. However, different terms may be offered, depending on the boat you’re buying. For example, some lenders may not provide loans if the boat is more than 20 years old. Here are a few other things to keep in mind when looking to finance a new vs. used boat:
  • Newer boats are more expensive up front and to insure.
  • On the other hand, used boats are less costly to purchase and insure.
  • If your credit score isn’t high, receiving financing for a new boat might be more challenging.
  • Lenders often require a marine survey for a used boat, which you’ll need to pay for.
There are also factors to consider, such as if you want the latest features. What size boat are you looking for? Where will you dock the boat? These questions, plus sound budgeting strategies, will help you make an intelligent decision when determining what boat to purchase. 

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. Online loan calculators can be enormously helpful when planning for your boat purchase.

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

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

The benefits secured loans provide include: as the lender takes on a lower-risk loan because of the collateral, secured loans have lower rates. Another advantage is that people with a poor 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, getting an unsecured loan is much more challenging 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, a home equity loan is another option some people consider. With this loan, you would use your home’s equity to fund your boat’s purchase. 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 pre-approval, you can shop for your dream boat and negotiate the purchase price.

The better your credit, the better your terms

As you can see, credit is crucial in securing pre-approval for a loan. If you have a high credit score, you have a better chance of getting pre-approved for the loan and receiving competitive rates. A good credit score is approximately 670-739, a very good score is 740-799, and 800+ is considered excellent.

If your score isn’t so good at the moment, you can take steps to boost it and increase your chances of being pre-approved for a boat loan. For example:
  • Ask for a copy of your credit report from one of the three main credit bureaus. Check it for errors and dispute any that you find.
  • Pay off your debts. Online calculators like this one are helpful when looking at debt consolidation options.
  • Pay your bills on time, every time.
  • Keep your credit balance below the limit.
Following these steps will put you in a better position financially, and you’ll be well on your way to financing your dream boat.

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 team has helped hundreds of members get boat financing, so we have become experts at navigating the boat buying journey.

Our boat loans offer:
  • Financing options for your new or used boat, sailboat, or other vessels
  • Refinancing on your existing boat loan
  • Flexible repayment plans
  • Variable and fixed rate options
  • Affordable rates
If you’re a previous borrower with Power Financial Credit Union, you might also be eligible for an additional rate discount. To help you prepare even more for buying a boat, download our free Boat Buying Guide.

Setting sail for smooth waters

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