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Difficult Boat Financing


Toymanator

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I helped my neighbor find a pretty good deal on a 23 LSV. This is his second boat, he had an old Malibu he paid cash for that he sold a few years ago. I found him a pretty good deal on this boat but he is having problems finding a boat loan. I am wondering if anyone has any contacts or knows of a company that could help him with his situation. I have sent him to all of my credit unions without any luck. He was really frustrated tonight when I talked with him and open about his situation. 

The guy is as conservative as it comes. He makes decent money and has enough cash flow to cover the boat loan. This isn't one of those cases where I should be telling him not to get a loan. He doesn't own his home, he rents it for around $500. He has paid off all of his cars and doesn't have any debt. The issue he has told me he is running into with the banks he is talking with is, he hasn't had a comparable line of credit on his credit history.  He hasn't had a car loan over $20k in his life. He is wanting to borrow around $100k for the boat. The banks are telling him that they have limits on how much they can go due to not having a comparable line of credit history. He has also found a cosignor with significant net worth but the banks he has looked at have told him that he has to qualify as well as his cosignor, so having a cosignor doesn't help his ability to get more money. The 100k feels like a pretty good loan to value for the 23 LSV. 

My recommendation to him was to find a lesser value boat this year and try and get into a newer one next year. But does anyone have any contacts at banks that might use different underwriting for a boat loan? Who have you guys used for your first boat loan? 

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What’s his credit score? Are they telling him no or just quoting him rediculous interest rates? Can he put more down? Has he tried to use a broker? Or financing through the dealer? Where is he located? 

I find it hard to believe he won’t qualify with a good co-signer... 

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He is saying his credit score is 780. He has said he wouldn't mind if they had a higher interest rate, he may only be keeping the boat for a year or two. Most of the banks are just turning him down or requiring him to put large amounts down. He told me he would prefer to put as little as possible down, I don't know if he has the ability to put more down or not. He mentioned he has most of his money tied up in other things right now. The dealers finance guy told him he should try the credit unions because he didn't think he would qualify with his lenders based upon his comparable lines of credit. 

It has made me somewhat thankful that I have borrowed money in the past. I haven't had any trouble finding a loan for a boat any where near to what he is experiencing. 

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Comparable lines of credit is important. Even more so than score. Tough situation. If his max loan was less than 20k, it will be difficult to get 100k imho. More money down is key. Will the strong co buyer with high net worth lend him 20-30k?  Maybe go into a long term loan that allows him to pay off the borrowed down payment quickly. Big equity position is the only thing that will help off set his lack of comparable credit. 

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This is exactly why I cringe when people say, "I've never taken a loan in my life, cash is king". Yeah, it is, until you're in a bind and need a reasonable loan, then you're screwed.

Hope he can figure it out.

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2 hours ago, boardjnky4 said:

This is exactly why I cringe when people say, "I've never taken a loan in my life, cash is king". Yeah, it is, until you're in a bind and need a reasonable loan, then you're screwed.

Hope he can figure it out.

Reasonable loan -  100k on a boat? 

In any event, more money down or cheaper boat.  Not sure if co-signer helps a lot on an expensive toy loan.

Out of curiosity what is the monthly payment on a 100k boat loan? 

Edited by oldjeep
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8 minutes ago, oldjeep said:

Out of curiosity what is the monthly payment on a 100k boat loan? 

Depends on financing term (15 or 20 years). 20 is under 700 a month depending on interest rate. 

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Maybe there's something you don't know about him.  This would be his biggest asset and his biggest liability.  Something is fishy and the banks know it.

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10 minutes ago, Pnwrider said:

Depends on financing term (15 or 20 years). 20 is under 700 a month depending on interest rate. 

Which provides the answer to "How the heck do they sell so many $100k boats?"

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1 hour ago, minnmarker said:

Maybe there's something you don't know about him.  This would be his biggest asset and his biggest liability.  Something is fishy and the banks know it.

That's a pretty strong leap.  He could have also come from a family that worked hard and taught their kids the value of not having debt to an absolute.  It may have been taken to an extreme and the family may not have taken on financial risk in the form of debt.  Some look at a boat as an investment on family time (I know we do).  This guy may now be willing and able to take on some debt to enjoy life, a risk that his parents didn't see taking.  If your credit score is lower due to factors like this, banks shy away. 

For example (and probably way too much information), my credit is very strong and my debt to equity is as well.  We are a debit card family, with the exception of two credit cards, and pay off the two credit cards we have each month (a Costco one I use for work and things from time to time and a Lowe's card for the % discount-I'm a project junkie).  I got hit once, dropped down what I consider a significant amount when looking to purchase a vehicle because I didn't have enough credit card room available (not kidding).  I made a bigger purchase on the costco visa we have and hadn't received the statement to pay it off yet.  Costco gives decent cashback so I will use it for big purchases.  We had plenty of cash in the bank at the time.  I didn't understand it, but was told that I should probably have another credit card open with a zero balance but lots of room. Why would I want that?  Seems silly to me and the opposite of good financial sense, but there it was.  And please don't get me wrong.  I feel blessed to have credit where I do, but I watch it very closely and work hard to maintain it.  I just wanted to point out some of the silly things that can have a negative impact on your score.  

On the flip side, I had a medical bill of $4.93 that they didn't mail out to me due to the small amount (fat fingered the bill pay amount and there was a small balance).  They apparently decided to just hold it until the next visit.  We didn't make it in to the office for many months and never knew about the bill.  It somehow slipped through their cracks and went out to collections.  My credit plummeted quite a bit.  We sorted it out over many months and got it back together.  Fast forward 1.5 years later that exact same bill showed back up on one of my reports and it dropped again.  Luckily I had all the previous paperwork, including the letter to the credit agencies, but It still took me 4 months to get it removed, all because the office never notified me of the balance, but sent it out to reporting as a delinquent account.

Things happen and some of the rules for evaluating credit are created for the least common denominator.  There may be something going on, but there could easily be another explanation, or none at all.  This scenario always reminds me of the hiring situations right out of college.  "We'd love to have you and we think you will be an amazing worker, but we're looking for someone with more experience."  How does someone ever get more experience if all they are willing to hire are people with experience?  Same with this:  "We'd love to have your money, but we want someone with more experience living beyond their means."  Not entirely accurate, but the sentiment feels the same. 

Edited by JeffK
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19 minutes ago, vanamp said:

Where in the world can you rent for $500 a month? My first dumpy a** apartment was $700 a month and that was over 10 years ago. 

Roommates...

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That's why I tell kiddos coming out of school, buying a home helps u buy a car and doesn't hurt u.. buy a car first and your screwed for buying a home.. 

Your credit is commonly degraded with many places now for not borrowing anything.. ie every blue moon Carry a smidge Ballance on a CC for a month and pay $5-10 in interest... ppl often forget it's a business ! Remember you're not a good customer if they're not making money off you! And nowadays banks require about zero risk on loans... It would be easier for him to buy a vehicle.. or a house... Boat... That's a hard flip for the bank... And thus why the interest rates reflect that... 

The guy should buy a 100K house... Rent it out or sell it...and then borrow the other hundred k or another hundred..would be no problem.. 

If the guy is paying $500 in rent I'm sure he's got 2K+for cash flow to do both...my freaking utilities and taxes are more than double that!   First time home buyer he could get a good rate too with less down! 

Wait... Do they make a "house boat" that surfs yet?  I'm thinking we might be on to something!

Edited by The Hulk
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1 hour ago, The Hulk said:

Your credit is commonly degraded with many places now for not borrowing anything.. ie every blue moon Carry a smidge Ballance on a CC for a month and pay $5-10 in interest... ppl often forget it's a business !

You are probably partially right but not completely.  I pay off the CCs every month, no car or boat or other loans, and mortgage loan to value is 40% or less - and my credit score is over 800.

Still think OPs friend is a risk.  Would not loan him 100k for a boat. He should get a used boat with cash.

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12 hours ago, boardjnky4 said:

This is exactly why I cringe when people say, "I've never taken a loan in my life, cash is king". Yeah, it is, until you're in a bind and need a reasonable loan, then you're screwed.

Hope he can figure it out.

This has definitely been a learning experience for me as well. I didn't know so much went into boat loans. I consider myself lucky that I haven't had the issues he has. I too cringe when I hear someone say they only use debit cards or they just read a Dave Ramsey book and are getting rid of all there credit cards. I am not against sound financial principles, I am in the finance industry myself. But shying away from learning these things about credit does not help anyone. 

6 hours ago, vanamp said:

Where in the world can you rent for $500 a month? My first dumpy a** apartment was $700 a month and that was over 10 years ago. 

This guy has a pretty sweet set up. It's an old farm home that has been gutted and completely renovated. It's on a small piece of land, he has an agreement with the landlord to take care of the land as part of his rent. He has a wood shop and a large storage shop behind the house. My kids love going over to there house. He hasn't had much of a reason to purchase a home until now. 

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We were in the same situation less than a year ago. I don’t know if it was just the banks themselves or the fact it was a boat from the Usa, nothing went through. 

Applied for a more expensive boat(logic:rofl:.....) with financing with the dealer and got approved no questions asked right then and there. So maybe try financing with a dealer direct. 

Owning your own business has its drawbacks.... Cut back on your own salary to save taxes but then the bank thinks you make no money.  

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10 hours ago, Cole2001 said:

We were in the same situation less than a year ago. I don’t know if it was just the banks themselves or the fact it was a boat from the Usa, nothing went through. 

Applied for a more expensive boat(logic:rofl:.....) with financing with the dealer and got approved no questions asked right then and there. So maybe try financing with a dealer direct. 

Owning your own business has its drawbacks.... Cut back on your own salary to save taxes but then the bank thinks you make no money.  

own your own biz? get a loan... hahahahahahahaha good luck chuck.... of course you can tell the bank your wont fire yourself! but honestly a school teacher making $35k could get a larger loan that a biz owner making hundreds....your high risk in the banks eye! 

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40 minutes ago, The Hulk said:

own your own biz? get a loan... hahahahahahahaha good luck chuck.... of course you can tell the bank your wont fire yourself! but honestly a school teacher making $35k could get a larger loan that a biz owner making hundreds....your high risk in the banks eye! 

That’s cause their living on draws and personal expenses funded by business and have a w-2 for their reasonable and customary salary (assuming sub s) that I wouldn’t loan money to ( I get it, I did exact same thing except already had established debt and income record before business). 

If that w-2 and tax returns consistently said 50000+ Owner salary snd the business return schedule C or 1120s or 1065 shows consistent profit or losses attributed mainly only to depreciation (which they take out to get to your true net income), then they will loan you money all day.  Have an 850 score and no black marks ever and you often don’t have to prove income unless your going to a CU that will never waive seeing your substantial w-2 or at least two recent pay stubs showing annual totals .  The thread posters problem his friend had was a credit score too low cause he hadn’t managed large lines of credit.  That is a very old problem for cash based payers.  That’s why they are advised to run credit or make loans offset by checking deposit ‘s near or equal to loan value to reduce rate and build credit .  Make the loan and pay it off early .  People living on cash are supposed to have significant cash reserves in excess of their investments CAUSE THEY HAVE NO CREDIT! Or a too low if a score to grant a no income verification loan.  The car dealers don’t mske you prove squat!!!!! Why, credit score 850!!!

Posters friend wanted his cake and naturally to eat it too.  He had his cash in probably real estate investments and he wanted a loan.

 Here’s a thought , mortgage one of those high equity houses or multi unit he probably owns!!

This is the oldest credit story since the inception of credit.  If you want it , solve the problem and the problem is their common sense living strategy of cash which I have recently started.

 I had the opposite problem of they would lend me anything snd I would take it cause 850.  So now I only put on cc what are actual or fudged business expenses or household bills.  The cash only walking around approach is teaching me alot about what I need and what I want .  Wife snd I are like teenagers buying each other any desire.  We no longer use our 850’s fir that purpose. 

Bought an expensive replacement to wife’s 16 year old  daily driver but put down $32000 cash, 6500 from sale of old and 26 from special fund fur that and the regular checking.  THAT HURT and we still have a 5 year $327 note!

Edited by granddaddy55
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I learned the hard way about credit too cause I used to be all cash, didn't like uncle sam knowing my business (not that I did anything illegal, just a privacy freak). I went to bank to finance piece of property many years ago that cost $100k, and had $300k of cash in the bank and even tho I had 720 scores at the time, because I had very little "credit history", they would not do it. 35% of score is your payment history, 15% is your AAOA (average age of all your accounts), 10% is how many new accounts you have, 10% is your "credit mix".....they wanna see you can have different types of credit like revolving accounts and bank issues CC's, installment loans like a vehicle payment and believe it or not a mortgage is NOT counted in that....except it does support a history of being able to manage a large loan and can count against you like it is with this guy; the final 30% of your credit score is your amount of debt...what they want to see is 5-10 CC's with high limits and you using less than 5% of it. If you have car and house mortgage then they are looking at your total DTI (debt to income).

FYI....FICO8 from Experian, Equifax or Transunion are the ONLY legit scores (300-850 range). CreditKarma/CreditSesame/CreditWise and those other sites are worthless numbers that no-one uses in actual credit decisions and why they give them out for free, they make money from pushing credit cards and other offers on the "fake" scores they give you (its a real score, just not one that anyone uses and is calculated with different parameters).

So I dedicated myself to learning their game and started "building my credit history" once I realized that you simply cannot operate nowadays without it, it becomes more important every year cause that is the way they want it. I now have 8 CC's with combined limits of around $200k and keep my utilization under 5%. I don't charge anything I cannot pay off but it pays to let smaller amounts report occasionally cause you basically "use it or lose it" in the credit game and the more you use it the easier it is to get approved. I keep a small car loan and have a small note on house. Because of this I can get anything I want now easily....but my credit history also shows the bank that I wont get what I wont pay for so it works both ways I guess. Because ID theft is so prevalent, I also keep my credit "frozen"....if I need it, I make a phone call and unfreeze it temporarily so it can be pulled, just too hard to operate in the world now without good credit so I protect it carefully and monitor monthly. Of course once you build up your credit as long as you keep the CC's open then the other stuff wont matter tho after 10yrs they can drop it off your history and then it can effect you again and start dropping your score. Its pretty complicated how they score things, I have seen people get denied for credit multiple times with a 750-780 credit score for exactly the same reason as stated above. The score is only part of the equation BUT every bank has their own in-house scoring model....if he really has a 780 fico8 score, someone should be able to do it, just gotta find the right bank and maybe pay a little more on the interest rate and/or put down more money. Frustrating place to be to have the money and know you can afford it, but not be able to get the loan due to how you chose to live which doesn't conform to how they "want" you to live.

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On 3/7/2018 at 10:17 AM, minnmarker said:

Maybe there's something you don't know about him.  This would be his biggest asset and his biggest liability.  Something is fishy and the banks know it.

Exactly what I was thinking.

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This is crazy.. why wouldn't he pay for it in cash... OH THE RISK!!!

 

Just kidding. Y'all are teaching me something new every time one of these loan threads comes across. Appreciate it! 

 

Wanting to be a cash only family, its good to read what others like minded have gone through when they are trying to maximize what their money can do for them. I like the basics Dave teaches (sorry @toymanator) but I am trying not to be head in the sand when it comes to credit/loans..

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This thread has been educational to say the least. I will say this about credit, I have never met a self made millionaire who didn't use credit. And I also have never met a millionaire who made his money from boat loans.

 

I am happy to report, I passed along some of the suggested lenders from this thread and he was approved for a loan today.

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