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Boat Loan Terms: considerations, commitments and costs

With a vast coastline and extensive inland lakes and waterways, Australia is a great place for boating. Recreational boating and especially fishing, have always been extremely popular activities and the coronavirus pandemic has attracted even more into boat ownership. The pandemic along with the extremely low lending interest rate of course. Being able to secure a boat loan and therefore their boat at very affordable rates has allowed many to achieve their boat ownership dreams.

The surge in popularity has even led to stock shortages in some categories. So in the rush to secure a low interest rate boat loan and a boat, many buyers may not be paying as much attention as they should to all aspects of their loan.

Jade customers do have the added advantage of a professional finance expert to source and assist with their boat loan. We focus on sourcing the cheapest interest rate boat loan for you and assist with many details and the paperwork. But it is still up to individuals to make the final decisions on many aspects of how they would like their boat loan structuring.

A major consideration is the loan term. We point out why close attention should be made to the term of a boat loan.

Long or Short Term Commitment

The term of a boat loan is the amount of time that the borrower commits to repaying the loan. A reference to terms is also made in regard to the conditions and terms of a loan, which is different. The conditions or terms are stipulations that a particular lender may designate for individual loans.

The boat loan term can be represented in years or months. We offer boat loans for terms up to 7 years or 84 months. The term of the loan is a major determinant of the monthly repayment amount. The more months the borrower has to repay the loan, the less the repayment amount. The shorter loan term period, the higher each monthly loan repayment will be.

A longer loan term does give the borrower more time to pay off the loan but also a long time to actually own the boat. A shorter boat loan term enables the debt to be cleared earlier and full ownership of the boat achieved.

So who decides that outcome? Lenders may have some say in the process. They will assess each boat loan application, taking into account the condition and age of the boat if it is a second-hand purchase. The profile and financial capacity of the loan applicant is a major focus for lenders. As the loan term essentially sets the repayment amount, the lender will want to have confidence that the borrower can easily meet a certain repayment amount each month. So should the borrower!

The boat loan borrower can of course decide, or at least request, their preference in regard to the loan term. Our consultants work hard to negotiate the preferences of each of our customers while guiding and assisting through the loan process.

If sourcing their own loan, applicants can approach multiple lenders to find the one that will agree to the loan term that they want. But the process of applying to multiple lenders can have a negative effect on an individual’s credit profile. For our customers, that is circumvented as we are accredited with multiple banks and lenders and can scour the market quickly and easily without impacting the credit score of our customers. And without spending their own time.

Long loan terms can be appealing on the surface, but applicants should do a deep dive into the flow-on effects of their decisions. Clearing the debt is pushed out to a later date with a longer term and this may impact other loans you are planning to take on in that time period.

There are also cost implications which we will cover next.

Boat Loan Cost Considerations

The cost of a loan includes the initial loan establishment costs and lender fees but the major cost impost in a boat loan is the interest payable. While low interest rate loans minimise that cost, it is affected by the loan term.

If paying off a loan over a longboat loan term, a greater amount of total interest is payable. With consumer loans, the interest payable on a loan is calculated daily and applied to the boat loan monthly. The shorter the boat loan term, the less total interest payable.

Another cost consideration in regard to the term of a loan is break fees. These are fees that are applied by lenders when a loan is finalised before the agreed end of the loan term. This can happen when a boat owner decides to upgrade to a better boat and sells or trades in their current vessel while they still have loan repayments outstanding.

This process involves paying out the existing loan which attracts break fees. Refer to our article on how to break fees are calculated for details. To avoid paying break fees, agree to a boat loan term that fits with your buying/selling/upgrading plans.

If you are the type that has a preference for getting a newer boat each say 4-5 years, then agreeing to a 4-5 year boat loan term makes sense and cents. If you agree to a 7 year boat loan term and sell that boat after say 5 years, the break fees would apply on a pro rata basis to the remaining 24 months of the loan.

Calculating the Boat Finance Term Costs

To work out the interest charges of a boat loan over different loan terms, use our Jade Boat Loan Table. Enter the loan amount and our current cheap interest rate and vary the loan term to see the differing repayments.

Our Jade Boat Loans consultants are experts in structuring loans and will  assist you greatly through the loan process. But if you’re in a hurry to secure a loan to secure that boat, then having a good idea of the loan term you’re after to advise your consultant can expedite the entire loan process.

For a cheap interest rate quote on your terms, contact 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.

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