When making a significant purchase such as a boat, one of the main priorities for buyers is to start comparing. That process often starts with the boat itself. Buyers will be considering all the features and inclusions of different types of craft to arrive at the one that best suits their water activities and boating style. Then might come comparing different boat manufacturers in that category and then the model variants before finally arriving at THE ONE. But that’s not the end of the comparing. Next might be checking out pricing and deals on offer from dealers that sell that particular make and model.
For buyers seeking boat finance to make a purchase, the comparing process doesn’t stop with the boat selection, it usually extends into the process of sourcing a boat loan. Borrowers will be looking for the cheapest boat loan and the cheapest interest rates. But in the finance sector, comparison and comparing have differing meanings – comparing loans and lenders and compare interest rates.
Comparing Boat Loan Interest Rates
When you see an interest rate displayed for any type of consumer finance – cars, boats, caravans, even home loans, you will see two different rates: these are known as the advertised rate and the comparison interest rate. It is a requirement under the law that lenders display both these rates plus an explainer of the details of the purchase example that the comparison interest rate was derived from.
The comparison interest rate includes the advertised rate as well as the fees and loan charges which relate to that particular loan. It is essentially indicating to the consumer the true cost of the loan. The requirement for a comparison rate to be displayed was introduced to counter lenders that may advertise a very cheap interest rate to lure customers, only to include exorbitant fees which made the loan far more expensive than perceived. The comparison rate gives buyers a more precise idea of the cost of the loan in terms of interest rates. The mandate to display comparison rates only applies to consumer finance, not business finance.
The comparison rate is derived by including:
- The amount being borrowed – the loan amount
- The interest on the loan amount at the advertised interest rate
- Fees and charges such as loan establishment fee, account management fees if applicable and relevant government charges if applicable.
- The term of the loan
- Repayment schedule
The comparison rate is the percentage arrived at by adding in all costs and interest and essentially dividing it over the loan term, allowing for compound interest computations.
As these factors (above) will vary from loan to loan and applicant to applicant, comparison rates are calculated based on a specific example. In the fine print alongside the comparison rate, you will see the specific details of what boat loan that comparison rate represents. For example, on new goods at a value of $50,000 for a 60-month loan at a fixed interest rate of X%. Individual lenders decide on their own comparison rate examples so there is no standard or universal blueprint, just a standard format.
The fees charged by different lenders will vary based on their individual policies and practices. As these fees vary, so will the comparison rates. That is, you can have two lenders with the same advertised rate but with different comparison rates.
Comparing Comparison Rates, Boat Loans and Lenders
Those seeking a boat loan will want to be comparing comparison rates when sourcing the cheapest rate loan. But remember, the comparison rate displayed by a lender will be based on the specific example as mentioned. Your loan amount may be greater, the loan term you want different.
In order to simplify the process, we have created a Boat Loan Lender Comparison Table which lists the advertised rate and the comparison rate for marine lending from ourselves and a number of other lenders and banks.
This tool is provided to allow users to calculate repayment estimates on boat loans based on a lender’s comparison rate and advertised rate. Simply enter the amount of your loan and how many years you would like as your loan term and the repayment estimates are displayed against each lender’s entry.
This chart is also a valuable loan resource for comparing boat loans across a selection of lenders. You will notice that not all banks and lenders offer a specific boat loan. As specialists in marine finance, Jade Boat Loans offers a Secured Boat Loan which is the most widely used loan for recreational boat buyers. This loan is at a fixed interest rate so repayments are fixed over the complete loan term.
Lenders that do not have a specific boat loan in their portfolio may be offering a more general personal secured loan which may be at a fixed or a variable interest rate. When comparing lenders, ensure you note the specifics of the loan that is being offered.
Both your boat selection and your boat loan selection are major decisions and deserve the comparison treatment to ensure you achieve the best outcome. When engaging Jade Boat Loans to source your loan, we do take much of the time and effort out of comparing loans. We are accredited with multiple banks and lenders and we actually do the comparing for you – sourcing you the cheapest offer that meets your requirements.
Contact 1300 000 003 for a cheaper boat loan quote.
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.
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