Are you looking to buy a boat but don’t think you have the credit to get a loan for it? Boats tend to be expensive, so getting a loan for them is more difficult than getting a small personal loan or a credit card. This means that you will need to show your lender you have the means to pay off the expensive loan. This becomes harder to do when your credit score is poor. Let’s look at what good credit is and how it applies to your boat loan so that you can be on your way to being out on the water in no time!
Let’s start with the basics. What is credit? Well, credit has a few definitions. Credit can be a certain amount of money you borrow and spend now with the promise of paying back later, like a credit card. However, when people discuss “bad” or “good” credit they are really referring to your FICO credit score and your credit history.
Your credit history is a report of every loan or line of credit you have received. Your credit report provides information such as where you got the loan from, whether the loan account is closed or still being paid off, and whether you made all your payments on time and in full. Lenders will look at your credit report to get more information on your ability to pay off loans and credit. Your credit report is summarized into a three-digit number that is easy to understand for you and your lenders. This credit score ranges from 300-850, with 850 being the best credit score you can get. It’s important that your credit score and credit report are relatively strong so you can have better access to loans.
Having “good credit” means that you have a history of consistently paying off your loans without missing payments. The more you do this over time, the stronger your credit will be and the greater access to loans you will have. In terms of credit score, a good credit score is roughly 680 and above. Borrowers with good credit tend to get offered lower interest rates and more favorable loan terms. Lenders are more willing to trust someone with a good history of paying back their loans, so they are happy to loan you money if they can trust you.
On the other hand, if you are consistently missing payments or failing to pay back your loans, you will eventually have “bad credit”. Every slip up can cost you points on your credit score and will show up on your credit report as well. Lenders will see these mistakes and be more hesitant to loan to someone they aren’t sure they can trust. If they give you loan approval, they will charge you higher interest rates and your loan terms will not be in your favor.
If you are looking to buy a boat, there’s a chance you don’t have enough money to buy it out of pocket. Not many people do. This is why specific boat loans are offered to people so they can have access to their boat now and pay for it over time. Boat loans are like most other loans where you pay back the loan over time with a fixed interest rate. However, not every boat loan is the same. Each individual loan can have different interest rates and loan terms.
Likewise, a boat loan might be a secured or unsecured loan. This is an important aspect to watch out for when looking to get a boat loan. If you get a secured loan, you will have to put something up as collateral for the loan. In other words, if you fail to repay the loan the lender has a right to whatever you put up as collateral. On the other hand, an unsecured personal loan is safer for the borrower as they are not required to put anything as collateral. Secured or unsecured, you still have to pay your loan back!
A boat loan can be very enticing. I mean, who wouldn’t want a boat as soon as they can? Before you take out a boat loan though, make sure you have a solid plan to pay it back or you could find yourself in some trouble.
Smaller loans and lines of credit like cash advances and payday loans are often available to customers with lower credit. On the other hand, larger loans like a car loan or a boat loan generally like the customer to have higher credit. Boats are expensive and in turn require buyers to often take larger loans out. While boat loans are still offered to customers with bad credit, lenders are less willing to give a big loan to someone they can’t trust as much.
While more goes into it than just your score, you’ll roughly want around 650-680 and above if you want better chances to get the loan. The lower your credit score is the less likely it is you’ll get the loan and the more likely it is you will have less favorable loan terms. You might not even get the full amount of money you need if your credit score is bad.
It’s obviously better if you have a good credit score, but what if you don’t? If you want to get a boat loan soon, can your credit score go up in time? Here are some things you can do to build your credit 6 months in advance of getting your boat loan.
The single most important thing on your credit score is your payment history. According to the regulating authority FINRA, your payment history is responsible for 35% of your entire credit score! Because of this, the best thing you can do to build your credit score (and prevent it from dropping), is to always make your payments on time.
While having a one-day-late payment really won’t affect your credit score, anything over 29 days late can have a gigantic impact on your credit score. Depending on how late your payment is, you could end up losing up to 100 points on your credit score. This can be absolutely devastating and could take years to rebuild. Along with your credit score dropping, you will also have to pay late fees and potentially more interest.
While not paying your bills on time can be devastating, paying them on time is the best way to increase your score. Make sure you budget enough money to make your payments so that you always have enough money to deal with them. Make automatic payments or constantly remind yourself to make your payments. Do anything and everything you can to make these payments on time!
Coming in at about 30%, the second biggest factor in your credit score is the amount of money you currently owe. If you still owe a ton of money to your lenders, your next lender will be less willing to lend to you. They want to know that you are focused on paying their loan back instead of worrying about other loans first. To make this less of an issue, focus on paying off all your current credit bills. If you have multiple credit cards, try to pay a few of them completely off and consider closing those accounts.
Having credit cards is completely normal and lenders know that. However, there can be a point that too many credit cards or too much credit card debt can be worrying to a lender. 6 months before you try to get your loan, try to start paying the credit bills off as much as possible. Likewise, try to use 30% or less of the amount of credit your credit card gives you. This is called your credit utilization rate. In other words, if your credit card company gives you $2,000 of credit, only try to use $600 of it. Anything more and your credit score could actually go down!
To go along with paying off your credit bills, try not to apply for or use any new credit cards. Lenders are able to see your credit accounts and how recently they were opened. Just as you don’t want to have a ton of credit to pay off, you also don’t want multiple credit accounts you have to worry about. If you have recently opened credit cards or you’re applying to get new ones, your lender will be concerned. They don’t want to see that you are taking on even more debt right as you are about to be given another loan.
Having recent credit or applications for new credit is responsible for 10% of your credit score. The more you have, the worse your credit is. Likewise, you will get a hard inquiry on your account if you recently applied for a credit card and this can take 5-10 points off your score.
Buying expensive items like a house, car, or a boat with a loan often requires that you make a down payment first. You essentially cover a portion of the cost and your lender will finance the rest of it with the loan you receive. Down payments for boats vary but are usually anywhere from 10-20%, with the typical down payment being 15% of the total cost.
Since you can pretty well assume you will have to make a down payment, it is important that you set aside money for it in advance. If your boat is expensive, 10-20% of the full price of the boat can be a lot of money. Save some money in advance for this down payment. Just to be safe, set aside 20% of the full price of the boat. Start cutting your spending in other areas so that you can start accumulating some money for this. See where you are spending most of your money and see if you can limit some of this. Saving money is not easy or fun but it can be necessary if you want to buy your boat without putting you in a big hole financially.
Hopefully you have made an effort to raise your credit over the past few months. If you haven’t and you need a loan soon, here are two ways you can give your credit a boost before applying for your loan.
Again, having outstanding credit is one of the things that impact your credit score the most. Before you apply for your loan, try to pay for things in cash or with your debit card. Try not to get new credit. If you do, do not use more than 30% of your credit that you were given. The less credit you can take out and use the better. Your credit score can only get stronger if you do this.
Just as you probably did some research to find the perfect boat for you, do the same when looking for your loan. Getting the right loan could save you some money. Compare interest rates and the loan term between lenders. Choose which one you feel that you will have the best chance of paying off successfully. The better your credit is, the more liberty you will have to choose between loans. Do your due diligence!
Do you just need a couple of hundred dollars more to pay off your boat? Are you trying to build your credit score but still need money? Whatever the case, a payday loan or installment loan from Possible can be your best option. We offer loans with a low competitively low APR. If you end up needing to push your payment back, we allow you to push it back by 29 days right within the app. These aspects of our loans make them easier to pay back and in turn help you build credit over a short period of time. Using our loans can get you that much closer to getting your boat or your boat loan. The seas are calling! What are you waiting for?
Interested in a loan with Possible? Download our app today.