Continuing our series on consumer finance topics, we take a look at boat loan defaults, explaining the details and implications in quick-to-grasp, easy to understand terminology. Knowing what a loan default is and with our tips on how to avoid defaulting on your boat loan, we hope you will be informed to better plan your finances while expanding your general financial understanding.
We know how excited and eager our boat loan customers are when they’re buying a new boat. We understand that you want to get your loan sorted asap, settle your purchase and get out on the water. But it is essential that you are fully informed in your decisions. If you truly understand all the details, you can better plan your budget and advise your Jade consultant of the repayment amount that will work with your finances through the term of the loan.
In arranging your boat loan, your Jade Boat Loans consultant will provide you with information around consumer finance and explain the specific details of your loan. This not just part of our great service is it also a requirement under the National Consumer Credit Protection Act.
One of the topics covered in that information is loan defaults.
Need to Know 1: What a Loan Default is.
A default is an unpaid or overdue payment on bills such as credit cards, mobile phones, power and all loan types which is 60 days or more overdue. Late Payments are when a payment is made between 14 and 60 days after the due date. Both can attract fees from the lender and have consequences for the borrower in the long term.
Need to Know 2: Causes of a Default
When your Jade Boat Loans consultant establishes your boat loan, one of the final steps is setting up a direct debit so the lender will automatically deduct the monthly repayment from your nominated bank account.
All Jade Boat Loans have fixed monthly repayments so the same amount will be deducted each month on a set date from your bank account.
If there are not sufficient funds in that account on the set date to cover the repayment, you loan may be headed into default territory.
If you rectify the situation and make the payment within 14 days it would be considered as a Late Payment. If you miss two payments that would be the 60 days which triggers the loan default classification.
Need to Know 3: What happens when you Default
- When you miss one payment the lender will likely notify you with actions to be taken so you can make the payment and then it would be considered as a Late Payment. Late Payments may still be reported by the lender to the credit agencies and appear on your Credit Report.
- Late Payments attract fees so your bank account will likely be deducted this fee.
- If you miss more than the one payment, meaning your loan is 60 days in arrears, it is classified as in default and a processes will be commenced by the lender. The process will vary from lender to lender but the end result is that your boat may be repossessed by the lender.
- With a Secured Boat Loan, the lender accepts your boat as security against the loan.
- When the repayments schedule is not met, ie you fail to make the repayments for 60 days, the lender is entitled to repossess the boat and sell it to recover monies owed to them.
- If you pay the arrears before the repossession action, you will be charged default fees.
- The bad debt/repossession process is covered by protocols which will involve a number of actions by the lender.
- The loan default will be reported to the credit agencies by the lender and this is a negative note on your Credit Report. This can affect your future applications for credit and loans.
Need to Know 4: Avoiding Defaults
To avoid late payments or ultimately defaulting on your loan there are a number of precautions you can take:-
- Ensure the monthly repayment amount that you agreed to when your Jade consultant arranges your loan is an amount that will work with your budget for the term of the loan.
- Ensure that your bank account where the repayments are deducted from has sufficient funds on the date the repayment is due, every month.
- If you change your bank account, notify the lender so a new direct debit authority can be set up with another of your bank accounts.
Avoiding the fees and consequences of late payment and defaults is important. If you are experiencing financial difficulties, either temporarily or more permanently, contact your lender to discuss the options or consult with a financial advisor.
For more information on sourcing a boat loan that suits your boat and your budget, speak with a Jade Boat Loans consultant 1300 000 003
