When the RBA raised the cash rate in May, it was the first time that interest rates, specifically the official cash rate, had been increased in around 12 years. While the decision had been pre-empted for several months, the reality of the 0.25% cash rate rise happening may take a while for some to get their heads around. Boat buyers planning a purchase with finance may even be contemplating postponing their purchase until they have a clearer picture of what the RBA’s increases will mean to the marine finance lending market.
However, delaying the purchase in a tight supply market may mean missing out on the craft of choice or a delay in delivery. A more pragmatic approach can be to consider how specific elements of a boat loan can be varied or rejigged to achieve the preferred outcome. Rethinking the details of how a boat loan could be shaped or structured and still achieve the targeted loan repayments and/or cheapest interest rate despite rates on the rise.
We assist with tips and hints as to how buyers can look at varying details of their boat loan to ensure they achieve the cheapest interest rate and the loan repayment figure that suits their expectations and their budget.
Setting Workable Goals
A first step can be to work out exactly what you want the boat loan to look like. While the interest rate is the main determining factor when it comes to the overall cost the monthly outgoing amount can have more importance to buyers. By that, we mean the loan repayment.
Before applying for a loan, buyers can set a goal they would like to achieve for their boat loan repayments. An amount that will work comfortably with their budget over the full period of the loan. Think of it as the affordability figure.
With that goal set, the task can then be to see how that can be achieved. By having a clear idea of the preferred make-up of the loan, buyers can be better placed to brief their Jade Boat Loans consultant.
Reconsider Terms to Reduce Repayment Amount
The first detail to consider varying is the loan term. That is the period over which the boat loan is repaid. There will be lender guidelines to meet in this respect which we detail below. But we’ll still explain how this works with the pros and cons.
Jade Boat Loans offers boat loan terms of up to 7 years dependent on a range of considerations.
The longer the boat loan term in years/months, the lower the loan repayment figure. With a shorter term with less monthly repayments, the repayments would be higher.
Using our Boat Loan Calculator is a simple way to see exactly how this works. Keep the loan amount and the interest rate steady while changing the loan term. See immediately how the monthly repayment estimate changes accordingly.
However, a longer loan term can attract a higher total interest payable on the loan than a shorter boat loan term. This consideration may considered with the prospect of achieving a cheaper interest rate loan to minimise that impact.
Another aspect to keep in mind when considering the term of the boat loan may be the resale value and/or trading-up time. If planning to trade in the boat for a new vessel after a certain number of years, it can be preferable to have any monies owed on the loan in line with that value. It may be preferable to have the loan completely finalised before selling or trading in so all proceeds can go towards the new boat. This can also avoid having to pay break fees by paying the loan out before the agreed end of the loan term.
When a Secured Boat Loan is finalised early, minimal break fees apply, but they are a factor worth taking into calculation.
Boat Loan Amount: Deposit or No Deposit?
The other detail to consider when targeting a specific repayment figure is the actual loan amount itself. How much in total does the loan applicant request for the boat loan? This will also be dependent on lender guidelines.
Variations in the loan amount can have significant effects on several aspects of the loan.
A higher loan amount equates to higher loan repayments, while a lesser amount would reduce the repayments. Once again, use the calculator to see how this could work for you.
More interest is payable on a larger loan amount. When interest rates were at record lows, borrowing the full purchase price of the boat plus adding in the accessories and/or options made a lot of sense. But as rates look set to rise in line with RBA decisions at the moment that may not be the preferred way to go.
Decision time around deposit or no deposit? Jade Boat Loans can offer no deposit boat loans which means the entire purchase price can be included in the boat loan total, subject to lender approval. For buyers seeking to reduce the repayments to a target amount, however, reducing the loan amount may be a better approach.
Reducing the loan amount can be done by paying a deposit to the boat dealer; not including the accessories in the loan, or simply selecting a boat with a lower price tag.
Our Assistance with Lenders
As mentioned several times above, lenders will have some say in what can be achieved regarding loan terms and loan amounts. Individual lenders have their guidelines and will also assess the applicant’s credit profile to assess the risk factor. A good credit profile is seen as less risky and may attract more amenable terms.
Consumer credit which includes Secured Boat Loans is governed by ASIC. Responsible Credit Providers including Jade Boat Loans and our lenders must abide by guidelines when making loan offers.
To navigate through the many aspects and options of marine finance buyers can engage the services of Jade Boat Loans. Our consultants handle the discussions and negotiations with lenders to work towards achieving the preferred boat loan for our customers. That includes achieving the cheapest interest rate and the specific details to deliver the loan repayment goal.
Despite the inevitable rate rise increases, there are ways that buyers can rework the details of their boat loan to achieve their preferred outcome.
Contact Jade Boat Loans on 1300 000 003 to discuss a boat loan quote that meets your preferred loan repayment goal
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 MIS-PRESENTED DATA AND DETAILS HEREIN.