For those who enjoy sailing off into the sunset, having your own boat is a convenient asset. You no longer need to plan ahead; you can go sailing or fishing whenever you wish. You can simply contact your loved ones and enjoy the feeling of being surrounded by clear waters.
But in reality, boats are expensive, and most people cannot afford to purchase a boat without any financial assistance. You can; however, get the boat of your dreams through boat financing. Many financial services can assist you to finance your boat, but you need to ensure you follow the correct steps to get pre-selected.
Read the article below to ensure you get financed for your dream boat:
Understanding what leisure finance is
Before going to a lender, you need to understand the concept of leisure finance. Leisure finance is for luxury items like a boat, jet ski, golf cart or caravan. Lenders understand that people love being a part of recreational activities, but these activities can be costly. And this is why they seek finance for these assets so that you can budget for your activities.
As we all know, obtaining financing isn’t easy, and lenders look at a number of things before pre-selecting. To get selected, you need to ensure that you are eligible for financing. A rule of thumb, if you don’t know how to go about something, is to call a financial service provider. They will be able to give you the information you need to make your decision easier.
Know what lenders look for when applying for finance
When looking for finance, it’s vital to know what lenders are looking for. You can’t go to a lender without spring cleaning your finances. And one of the things that can count in your favour is an impeccable credit score.
Your credit score is a representation of how you handle your finances. A number of things are considered, such as your credit utilisation, your payment history, court judgements, length of your credit history, and enquiries on your account. This is why you need to ensure you have a positive credit score before you go to a lender.
When getting pre-selected for finance, you also need to be employed. This is to show them that you can meet their required monthly payments.
You will also need the relevant documents such as your South African identity book or card, a valid skipper’s license, a recent payslip to show proof of employment and a three-month-old utility bill. Insurance details will only be required once you have been pre-selected.
Improve your credit score for a successful outcome
Now that you know what lenders look for when applying for finance, this is where you need to work on improving your chances. The main thing you need to do is focus on improving your credit score. Many people in South Africa don’t understand the importance of having a positive credit score, but this can significantly improve your chance of being selected for finance, as well as receive a lower interest rate. Keep in mind that you can only get a low-interest rate if you are seen as a low risk to lenders.
Do not go to a lender before checking your report because you need to monitor for any discrepancies. If you don’t review your credit report, it can affect your financing opportunity.
Here are things to consider when improving your credit score:
- Applying for too much credit: if you apply for too much credit within a short period of time, it can impact your score negatively. Keep in mind that every time you go and apply for new financing, lenders make an enquiry on your account. That enquiry or rejected application will stay on your name and affect your score. So, before applying for a loan or revolving credit, check your eligibility and wait a few months before applying for new credit.
- How long have you had your accounts: if you pay your accounts on time, this can work in your favour. However, only if it is a positive reflection that you have been making payments on time. This shows lenders that you are a reliable customer and that you are financially capable of making consistent payments.
- Avoid missing any payments on your accounts: you are required to pay the amount due on all of your accounts, on time, every month. This will show lenders that you can handle your finances, and that you are reliable and trustworthy. Always keep a note that a missed or failed payment can reflect on your score for up to five years.
- Credit utilisation: the amount of credit you have used needs to be 30 percent or lower than your total credit limit. This will show lenders that you aren’t dependent on your credit and that you know how to handle your accounts. An effective way to improve your credit utilisation is by having more than one revolving credit, and only using small amounts of credit. Having more than one credit account will increase the total limit you have. This will show lenders that you have credit, but you aren’t using it, and you are a responsible adult.
Pay off some of your current debt
One of the reasons why you need to pay off your debt is that it can give you leeway for your boat finance. Boats are expensive, and you will need a large amount of money when purchasing. When you start settling your existing accounts, you are increasing your credit utilisation ratio, which will work in your favour. But you are also making a good financial decision for yourself. The last thing you need is to be in a large amount of debt.
Lenders will look at your affordability, meaning the amount of financing you can afford. This is done by calculating your monthly expenses and seeing how much money you have after deductions. This is why it would be beneficial for you to have fewer debts to pay
Go to lender
The last step is going to your lender.
Only once you have ticked off everything below, you will be able to visit a lender.
- You have worked out your affordability.
- You know what boat you’re interested in, and the price of the asset.
- You have your documents: South African ID, skipper’s license, recent payslip, proof of address available.
When you have all the required documents, it is easier for you to gain confidence and discuss terms with a lender. Take the time to answer as many questions as possible, as you will likely feel unsure of the finance process.
When you have planned everything accordingly and have followed the necessary steps, getting selected for financing isn’t as daunting as it seems. Lenders only want to know that you are trustworthy and that you will be able to pay off the loan amount. If you can prove that, then you’re already one step closer to getting your dream bo