The best way to finance your boat?

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Buying a new boat is an exciting time for the family. The moment you take your new toy out on to the water, it makes the sometimes “stressful” nature of going through the purchase all worthwhile.

Fast forward a few months, and it is important you do not regret signing up for the loan on the boat. So our team have compiled a “what too guide”, to help you through the process and your lending decisions. Boat loans are certainly not a “one size fits all” but here are some key factors to consider.

Don’t make hasty decisions

The less you pay in interest and fees over the life of the loan, the better. It sounds basic enough, but in the moment of purchasing a new boat it can be very easy to get caught up in the euphoria. We are all guilty of it. It’s our emotional instinct kicking in and we just want that Boat, and we want it now. So you may be tempted to take the first loan offer that is presented to you. It is important to slow the process down, be methodical and take your time in choosing the right loan for you. A finance broker can help with this by sourcing the best deal through the range of lenders on their panel. This will save you a lot of time trawling the internet for the right loan.

Comparison rates can be a good guide to determine the effective cost of a loan over its lifetime, however they are a standard calculation and may not apply fully to your situation. For example, the comparison rate on a loan over 7 years may be less indicative of the effective cost if you decide to repay the loan earlier. A finance broker will ensure these factors are considered in their overall assessment of your requirements and objectives. You can read more here about the best loan for you.

Avoid Dealer Finance

The Dealer may offer finance solutions and promise to provide a quick turnaround, but this could lead to an inferior loan product for you. Why?

Generally, the in-house finance operators are not licensed and do not have an obligation to abide by the principles of the NCCP Act (2009), If they are exempt, they are restricted by the number of lenders they can access. Having a limited lender panel, could limit their access to the best marine finance options in the market. By using an external finance provider (such as a bank lender or finance broker) there is no conflict of interest in the event of an issue arising with the purchase. Under the NCCP, Finance Brokers are required to perform a Preliminary Assessment which involves capturing your personal requirements and objectives and finding a loan to suit these needs. You can read more here on the pros and cons of financing through a dealer or finance broker.

Age of Boats

The age of the boat can affect the interest rate that you get charged. Older boats will generally attract higher interest rates as the boat is being used as security for the loan, and older assets tend to be less attractive security to lenders. The newer the boat (say, up to 10 years old), the more lender options you are likely to have available to you. And the more options you have, the better the deal you are likely to get.

Despite this general rule, it is worth noting that an unsecured loan product is not affected by the age of the boat.

Secured or Non-Secured?

When a loan is secured, the boat is used as collateral and the lender registers an interest over it (on the PPSR). This entitles the Lender to take the boat back in the event you do not make the repayments on the loan. This is a common way of financing any asset because you generally get better interest rates on a secured loan than an unsecured loan. However, if you decide to sell the boat then the loan would have to be repaid from the sale.

An unsecured loan is not secured against the boat, so it is free of any encumbrance. Generally the .interest rates are higher on unsecured loans although currently there are rates as low as 5.95% (comparison rate 5.95% / effective 17th May 2021). Unsecured loans provide you with the flexibility to repay your loan early without having to remove the asset as security, or sell it.

Choose a reputable finance broker

Most finance brokers are reliable and reputable; however you do need to choose carefully. Here are some basic checks:

  1. Ask for recommendations from friends and family.

  2. Do they hold industry memberships such as the FBAA, MFAA, and COSL? Each of these Industry Partners have a Code of Conduct which Brokers must abide by to retain their membership.

  3. Do they have a diverse panel of lenders, preferably more than 10 so a choice of product options can be provided.

  4. Check their Facebook and Google Reviews for customer feedback.

A finance broker will take the hard work out of the process by sourcing the best loan for your circumstances. Here at yesapproved.com.au we have access to over 20 lenders who have their own set of niches and products. It is very time consuming to compare these lenders and their products so let the broker do the work for you.

Loan Terms

Loan terms vary between lenders; however 7 years is generally the maximum term and 1 year the minimum term. Consider the timeframe in your overall requirements. If you are keeping the boat for 4 years, look to repay the loan over the same period.

Even lower interest rates over longer terms will equate to higher interest charges. Consider a shorter loan term or a loan with no or minimal early repayment penalties, so you can make extra repayments. This will reduce your overall interest charges.

Contribute a Deposit

A deposit isn’t essential but it will reduce the amount you borrow and your overall interest charges, over the term of the loan. It will also help reduce the lenders risk, which may result in a better interest rate.

Private Sales

If you are purchasing the boat privately, ensure additional checks are conducted on the Vendor and the Boat. As part of our service at yesapproved.com.au, we perform these checks on your behalf. This includes PPSR, Identity checks and sighting of the goods (if required by the Lender).

Pay more, and more often

The basics of repaying a loan earlier is to pay as much as you can, as quickly as you can. It’s that simple, no magic tricks. So find a Lender who has no early termination fees and the flexibility to make additional repayments. It could save you $ 000’s in interest over the term of the loan.

At yesapproved.com.au we specialise in Marine Finance and are here to help you with any of your finance enquiries. Contact the team on 08 9304 2010 or Hit Learn More.

The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.

Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs.

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