While browsing the market to select a new boat, if requiring finance for the purchase, buyers may also like to start thinking about the boat loan collateral they may need to get approved. Comparing interest rates and loan terms is important. But if you can’t meet the collateral requirements for that loan product and lender, a rethink of the purchase may be needed.
As many buyers will quickly realise, there are differences in marine finance interest rates, terms and loan amount limits on finance for watercraft across the consumer credit market. In addition, differences in what is deemed suitable collateral for a marine vessel loan can also present.
Why is this important? Where a buyer cannot meet the boat loan collateral guidelines for a particular loan or lender, it may lead to having to lower the finance requested by making a larger deposit, to having other goods or assets tied up as additional collateral, finding the cash to purchase the vessel, or a worst-case scenario, sadly foregoing that new boat. Being across boat loan collateral requirements and how they may impact the finance, may contribute to selecting the boat to purchase and to securing the most appropriate and affordable marine finance.
Boat Loan Collateral - Explainer
Collateral for a loan is the security provided by the borrower against the funding provided with a secured form of credit. Security takes the form of assets such as the goods which are being financed or other assets. The goods put up as collateral need to be approved as suitable by the lender. Most new goods, including watercraft, are generally accepted by lenders as suitable collateral for secured finance. Whether or not the vessel is considered to be suitable as the only form of security for the loan, is subject to the lender’s decision.
Where the lender deems the goods as insufficient for the total collateral required, the loan applicant may offer additional assets such as property, cars and other goods. If the goods being financed are not acceptable to a lender as collateral at all, such as with some older boats, borrowers can consider unsecured finance options.
To confirm they have an interest in goods under finance, lenders report this interest to the PPSR – the Personal Property Security Register. The interest remains on the register until the borrower finalises all outstanding payments. At that time, the lender removes their interest over the goods.
When a lender accepts watercraft as boat loan collateral, should the borrower default on the finance, the lender can repossess the boat and sell it to recover the funds owed. When a loan is secured with collateral, lenders know they have this ability to recover funds and as such, offer lower interest rates on secured compared with unsecured finance.
Process of Approving Boat Loan Collateral
ASIC regulates the consumer credit market and sets out the information that lenders must obtain from applicants and the guidelines for lenders to adhere to approving personal loans. But the guidelines for collateral approval may vary with different lenders.
Approving collateral as suitable loan security is part of the loan application assessment process. Lenders review credit scores and profiles, income, expenses and financials as well as the age, condition and value of the goods offered as loan security.
In approval goods for loan security, the lenders may look at the value of the asset and the amount of the loan the applicant has requested to finance those goods. This is referred to as the loan-to-value ratio. They will be considering the value of the boat against the loan amount and into the future, if the borrower defaults and they face repossessing the boat and reselling it. They will want to be confident that they can recover their funds. Lenders may accept a boat as total or partial collateral for a loan.
The applicant’s credit score and history are integral to all aspects of boat loan approval. High scores attract better rates as these applicants are considered to have good creditworthiness. The lender has confidence that the individual will meet the loan obligations.
With security against the funding and the confidence of recovering funds should the need arise or with confidence that the borrower will meet the repayments, lenders can be in a better position to offer better rates and approve higher loan amounts. A higher borrowing limit may present buyers with the option to borrow 100% of the purchase price of the boat.
Boat Loan Collateral – Secured v Unsecured Finance
Buyers purchasing new and good quality second-hand boats will typically apply for a Secured Boat Loan. New vessels are generally acceptable to lenders as collateral for the finance. An assessment of the applicant’s financials will determine if additional security is also required.
Second-hand boats are assessed by lenders for suitability as finance collateral. This assessment includes the condition, age, current state and value. Where a lender deems the vessel unacceptable as finance security, buyers can apply for an Unsecured Personal Loan. This credit product can be approved without collateral but attracts higher interest rates and with some lenders lower borrowing limits than secured credit products.
If considering the purchase of a second-hand boat, buyers can use our Boat Loan Calculator to compare Secured and Unsecured Finance repayment estimates. To confirm eligibility of a particular vessel as suitable loan security, buyers can always speak with one of our brokers prior to committing to the purchase.
How Our Broker Services May Assist with Boat Loan Collateral Requirements
Using Jade Boat Loans to source marine finance, buyers can have boat loan collateral requirements addressed when securing the most suitable finance deal. We have over 80 lenders in our lender base, which enables us to match each customer to the most suitable lender. Suitability may be in regard to credit profile, financials, eligibility criteria, and the collateral required for approval.
We match customers and their boat with the right lender to ensure a streamlined approval process with the most competitive rates, attractive terms and workable repayments.
To discuss boat loan collateral requirements for your finance, speak with 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.
