ABILITY TO REPAY THE LOAN

The lender will evaluate your ability to repay the loan based on your income and the amount of outstanding debt you have. The lender will first calculate your debt to income ratio based on the amount of income stated on the application. In some cases, usually where the applicant is self employed or the loan amount is over $100,000, the lender will require proof of income, such as current pay stubs, W-2’s, and/or tax returns.

Lenders have different criteria for acceptable debt to income ratios and monthly cash flow. The acceptable debt ratio can range from 35% to 65% and may often involve the analysis of amount of free cash after all debts are paid.

To calculate your debt ratio, add up all of your monthly debt payments, including your mortgage or rent, car loans, credit cards, and proposed boat loan payment and divide by your monthly total income before taxes. This is your debt to income ratio.

If you have a car allowance, business paid credit cards, or other business paid expense, be sure to tell your marine loan consultant so that it is taken into consideration.

A general rule in understanding what it will cost you to own and operate your boat is to “double the payment.” For example, if your boat loan payment will be $250, then it will probably cost you $250 per month to operate it, for a total of $500 per month. When you’re shopping for your boat, make sure you’re comfortable with the total cost of ownership.