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Buying a boat is a relatively large financial outlay and most people need to finance their purchase. If you’re in the market for a boat and plan to apply for a boat loan, there are a few things you should know if you want to get the best deal available. Here are our 7 tips for getting the best boat loan.
By following these tips, you can be sure that you’re getting the best possible deal on your boat loan for your individual sitution.
1. Shop around for the best boat loan interest rates.
Interest rates on boat loans can vary widely, so it’s important to shop around for the best deal. Talk to different lenders and compare interest rates, fees, and terms. Don’t just focus on the interest rate, though. Make sure to compare the total cost of the loan, including fees and other charges. If you are arranging your car loan through a finance broker, he/she can provide you with all of this this information very quickly. A finance broker will help to narrow down the lenders with lending criteria to fit your situation, and to compare their products, options, rates and fees - so that you can find the best boat loan for your needs.
2. Get pre-approved for a boat loan before shopping for a boat.
One of the best ways to get a great deal on a boat loan is to get pre-approved for financing before you start shopping. This way, you’ll know exactly how much you can afford to spend, and you’ll be in a stronger negotiating position when it comes time to purchase your boat. Applying for a pre-approved boat loan is a simple enough process and can be initiated online. Your finance broker can guide you through this process.
3. Be aware of the different types of boat loans available.
There are a few different types of boat loans available, and each has its own pros and cons.
A secured boat loan, such as a hire purchase loan, asset mortgage or leasing, will offer the best interest rates because the lender has legal ownership of the boat until the loan is repaid.
An unsecured boat loan is effectively a personal loan that you will use to buy a boat. The boat is not used as security for the loan and you can expect a slightly higer interest rate.
Whether you decide on a secured or unsecured boat loan will depend on a number of factors including whether you are employed/self employed, your financial position as well as personal taxation considerations.
The type of boat loan that you choose will also be influenced by whether you are buying a new or used boat and the remaining life expectancy of the boat.
Essentially, individual circumstances will dictate the best fit. Your finance broker can walk you through the options to help you determine the loan type most suited for you.
4. Understand the terms of your boat loan.
Be sure to understand the terms of your boat loan before you sign anything. Signing the loan contract may well be the ticket to getting your boat but, for the sake of a little research and advice, you might just avoid some nasty surprises down the river.
Make sure you know and understand:
- the length of the loan,
- the interest rate,
- the monthly payment,
- any residual or balloon payment that may be due at the end of the loan term
- and any penalties for early repayment.
The brokers on our specialist marine finance panel will be happy to answer any questions you might have about the loan terms and conditions of the various lenders and loan products..
The Great Aussie Boat Buyer's Handbook: A Guide to Loans, Repayments and Ownership Costs
Buying a boat is exciting, but the finance decisions can shape the experience long after launch day. This practical guide helps Australian buyers understand boat loans, marine finance options, repayments, interest rates, fees and the wider costs that often sit beyond the purchase price.
Inside, readers will learn how secured and unsecured boat loans differ, how to use repayment calculators, what lenders may look for during an application, and how insurance, maintenance, storage, fuel and registration can affect affordability. With plain-English explanations, checklists, FAQs and simple examples, it is designed for first-time buyers, returning boaters and anyone comparing finance before signing.
5. Consider the total cost of ownership when financing a boat.
When you’re considering a boat loan, it’s important to think about the total cost of ownership, not just the purchase price of the boat.
There are several other ongoing (and unavoidable) costs associated with owning a boat, including insurance, storage, and maintenance.
Also, your boat will depreciate in value over time so, given that you are likely to sell your boat at some time in the future - for an amount that is less than you paid for it, this capital loss is a very real cost of ownership.
For example, if you were to buy a brand new boat for $100,000 and sell it for $60,000 in 5 years time, the depreciation average of $8,000 per year is a cost of ownership.
On the other hand, a second hand boat will usually depreciate much slower than a new boat - so the yearly depreciation cost may well be much lower ... but the maintenance costs could potentially be much higher, particularly if there is no warranty available on the used boat.
So remember, when you are committing to a boat purchase, you are also committing to much more than a monthly loan repayment and you should be sure that your budget will allow for all of these costs.
6. Make a larger down payment to reduce your boat loan repayments.
If you can afford to pay a bigger deposit payment when you buy your boat, you’ll be able to lower your monthly payments because you'll need to borrow less. This can be a great way to save money on interest over the life of the loan.
Further, the more equity that you put into the boat, the greater the security for the lender. So, making a bigger down payment could well mean that you will qualify for a lower interest rate.
A finance broker can give you an indication of which lenders' products would offer interest rate savings for various deposit amounts.
7. Pay off your boat loan as quickly as possible.
If you can afford to, pay off your boat loan as quickly as possible. This will save you money on interest and help you become debt-free more quickly.
There are three main ways you can pay your boat loan off quickly.
- Choose a shorter loan term. The monthly loan repayments will be higher but the overall loan cost will be lower
- Pay more than the scheduled payment.* Where possible, you could have the automatic monthly repayment from your bank set at to pay amount higher than the scheduled monthly repayment on the loan.
- Make extra payments.* Whenever you have surplus cash or unallocated savings, you could use it to reduce your loan.
*Not all loans have the flexibility to make extra payments so, if you intend on reducing your loan interest costs in this way, your broker can talk to you about loan products that will work best for your needs.
By following all of these tips, you can be confident that you’re getting the best possible deal on your boat loan.
Published: Sunday, 9th Oct 2022
Author: Paige Estritori
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