Boat loans and marine finance are available over reasonable loan terms and when arranged through specialist marine brokers such as Jade Boat Loans, the loan term is negotiated to best suit our individual customer requirements. But things can change over time in many areas of our lives. So what happens if you need or want to make changes to the boat loan mid-way through the loan term? We're covering off several scenarios of possible ways to chart a course to a satisfactory outcome.
Changing a Boat Loan
Several reasons may prompt a boat loan holder to want to make changes to their loan. Two of the most common reasons can be boat loan interest rates and repayment levels. They may have secured their loan at a much higher rate than is currently available and be seeking to secure a loan at the current lower rates. Their income may have changed over time and they are seeking a change to the fixed repayment schedule.
Both these scenarios can play out in differing and similar ways. First, we provide an update on the features of the most popular loan type for personal boat buyers.
Secured Boat Loans: Explainer
The Secured Boat Loan is the widely used loan form for buying all types of boats for private, recreational use. This type of loan follows a fairly universally accepted secured loan format where the boat is the security against the loan. If the borrower defaults that it fails to meet the repayment commitments the lender holds the right to repossess and on-sell the boat to recover the outstanding monies.
When arranged through Jade, and other lenders follow a similar process, this type of loan has fixed elements: fixed interest rate and fixed loan term, resulting in a fixed repayment schedule. Our consultants work to achieve all those elements to meet the preferences and requirements of our customers.
In taking on a boat loan, the borrower is engaged in a financial contract with the lender. If changes are sought by the borrower, there are different options and processes available.
Changing Repayment Schedule
If your income situation has changed since taking on the loan you may be looking to increase or lower your monthly repayments.
If looking to increase the repayments and hence pay out the loan and own the boat earlier, that is a very simple process. As arranged through Jade at a fixed interest rate, the Secured Boat Loan allows for additional payments to be made. You can either increase the amount you pay every month by contacting your bank and amending the direct debit or you can make one-off, occasional extra lump-sum payments.
By increasing the repayments either each month or by a large single payment, you will be paying out the loan early. For fixed interest rate loans, what is known as break fees will apply when a loan is finalised before the agreed loan term. These break fees are considered as ‘minimal’. Before proceeding with this scenario, you may wish to contact your lender and inquire about the current break fees. When arranging your loan initially, you will be advised of all fees which apply.
The other scenario is when your income or other areas of your life have changed in such a way as you seek to reduce your repayments. During the coronavirus crisis, many loan holders sought to pause or amend loan repayments across many different loan categories. Due to the unprecedented nature of the situation, most banks and lenders assisted their customers.
Under normal circumstances, this may not always be possible. In the first instance, loan holders may seek to engage with a financial advisor to discuss their overall financial situation. Loan holders can contact their lender and discuss the options available to reduce repayments either for a short term or for the balance of the monies outstanding.
If a permanent reduction to repayments is sought, that would extend the loan term. This effectively could entail establishing a new loan contract. Replacing an existing loan with a new loan is known as refinancing.
Refinancing to New Repayments or New Interest Rates
Boat Loan Refinance may be sought to either achieve a better interest rate than the current loan or a reduced repayment schedule. This involves establishing a new loan to replace an existing loan. Costs would be involved in establishing the new loan contract and break fees may be applicable for finalising the existing loan before the agreed loan term. Reducing the monthly repayments will extend the loan term.
Jade Boat Loans provides refinancing services for both used and new boat loans and commercial marine finance contracts such as boat leasing. In conducting the process, we source a quote for the new loan and present it to our customers for consideration. The costs involved in paying out the existing loan, including any applicable fees, can be included in the loan. The overall costs of refinancing should be taken into consideration when considering refinancing.
If seeking a lower interest rate loan, these costs may be neutralised by the lower interest rate. To get a better idea, feel free to compare lenders and banks with our online boat finance interest rates table
Changes to loans can be made mid-term but the costs and processes will vary depending on the individual circumstances. To ensure you achieve a satisfactory outcome, engaging the services of our professional marine finance brokers can be extremely beneficial.
Contact 1300 000 003 to discuss what changes you would like to make to an existing boat loan.
DISCLAIMER: THE INFORMATION AND SPECIFIC DETAILS CONTAINED IN THE CONTENT OF THIS ARTICLE HAVE BEEN PREPARED AND ARE PRESENTED PURELY AS GENERAL INFORMATION AND NOT INTENDED AS THE ONLY SOURCE OF FINANCIAL ADVICE FOR BOAT BUYERS AND LOAN BORROWERS. FOR THOSE THAT CONSIDER THEY REQUIRE SPECIFIC ADVICE, THEY SHOULD CONSULT WITH A FINANCIAL ADVISOR. LIABILITY IS NOT ACCEPTED IN REGARD TO ERRORS AND MISPRESENTED DATA AND DETAILS HEREIN.