With the current commentary around when and if the Reserve Bank of Australia (RBA) will announce a cut in interest rates, those planning funding to buy a new vessel may be considering their rate and loan options. Comparing fixed and variable boat loans to decide which may present the best value, or cheapest way to fund their watercraft. Essentially analysing possibly fluctuations in the marine financing markets.
It’s understandable that the prospect of possible cuts to interest rates would have buyers wondering what will happen and what they should do. If they should delay their fixed rate credit application and boat purchase or proceed with a variable option immediately in the hope their rate will be cut at some time. It is an interesting scenario and well worth doing a deep dive into to clarify some of the key factors.
How Fixed and Variable Interest Rates Work
First thing is to understand how the different types of interest rates work with marine finance. Unlike with say home loans where financing may include a term with both types, marine finance has the one rates type for the full term.
Fixed rates are the most popular for marine financing. The rates are locked in when the credit is settled and stay the same over the complete term. Even if the lender, the market or the RBA makes a change in pricing, the rate for that borrower remains unchanged.
The appeal is the unchanging factor as repayments also remain unchanged. Borrowers can plan their budget well in advance – over the full marine financing term.
With variable rates, the pricing is subject to fluctuations in the markets. When the RBA announces a cut or an increase, lenders can make their own decisions if they will follow or leave their pricing as is. Some lenders make changes ahead of the RBA announcements, pre-empting the decisions.
With these rates, borrowers can see their repayments change – increase or decrease, in sync with market fluctuations. Creating a lesser level of assurance when planning budgets.
Fixed and Variable Boat Loans Options
Rates can be different with the different types of marine lending products. Secured lending products are the most commonly requested types of credit for new and many good used vessels. This product can be used to fund all types of vessels – jet skis, dinghies, sailing craft and all sized power cruisers.
We arrange our Secured Boat Finance at fixed rates and the best rates sourced from across a large number of lenders in this market. Some lenders may offer a variable general consumer credit product with variable rates but most secured products have fixed rates. We focus on sourcing the best rates for each customer from across a vast number of lenders.
Unsecured Personal Credit https://jadeboatloans.com.au/unsecured-personal-loans can be at fixed or variable rates. This lending product is typically selected where the vessel is not accepted or is not available as collateral. This may occur with older craft, those in poor ‘ready for refurbishment’ condition and for buyers of time-share boat arrangements.
There are differences with the features with these lending products. Variables may not attract break fees if the borrower decides to pay out the credit prior to the end of the term. The vessel is not used as the collateral for this type of credit but some collateral in another form may be requested. This may be other assets or personal guarantee.
Considerations When Making Comparisons
Considering which may to go with the type of marine credit interest rates can be a complex process. Lending rates on marine financing vary across the lender market, on both types of rates. Rates also vary depending on the credit score and history of the applicant.
When considering which type of rates are best for them, buyers will need to make their own individual decisions, speculate, around where they think the market is heading over their up to 7 year marine financing term.
Unsecured lending products are typically priced higher that secured financing options. Over the term of the funding, a higher priced option would result in a larger total interest.
Buyers will also need to make their own decisions as to whether they prefer the assurance and confidence provided by financing that with set repayments over a set term. Or if they prefer the alternative, subject to market fluctuations.
Using our boat financing calculator may assist those looking to compare their marine financing options.
Engaging Expert Support for Best Rates, All Options
Jade Boat Loans provides specialist support for securing the best boat loan rates from across a vast lending market for both fixed and variable rate boat loans. As specialists in the marine financing sector, we have the expertise, resources and lending accreditations to secure the most suitable options for all types of buyers and all types of vessels.
For expert support to compare and source fixed and variable rate boat loans contact Jade Boat Loans on 1300 000 003.
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.
