A key feature of the Secured Boat Loan is that the loan holder is allowed to make additional payments on their loan. On the surface and without delving deeper, this may seem like a strange thing to want to do. Why would anyone contemplate making more payments? To pay more than they have to on a loan. But in reality, it can be a smart decision. As specialists in marine finance, Jade Boats Loans explains how making extra boat loan payments work and the outcomes for the loan costs overall.
After months spent in lockdown over the past nearly 2 years, many individuals have improved their personal balance sheets by spending less. They have accrued more discretionary funds and savings due to limited opportunities to spend on things like dining out, travel and entertainment especially.
Others may have received a useful and sizeable personal income tax refund courtesy of the Federal Governments budget measure to extend the low and middle income offset. This includes up to $1080 off the tax payable for income earners in certain tax brackets.
These types of extra sources could be put to good use in making additional payments on consumer loans such as boat loans.
Loan Payments: The Basics
The option to make voluntary extra payments on a boat loan can be a possibility to keep ‘up the sleeve’ and in the mix when setting up a new boat loan. When making a loan application this aspect can be discussed with your Jade consultant and loan repayments sought with this in mind.
Alternatively, loan holders can make spontaneous and sporadic extra contributions when their personal financial conditions permit. No commitment to make any extra payments needs to be made when the loan is being sourced, priced and structured. But if it is a possibility you are considering, it may affect how you request your loan be structured.
Our Secured Boat Loans are secured with fixed repayments, fixed loan terms and fixed interest rates. These elements remain constant over the complete term of the loan. So even if the RBA does move on increasing the official cash rate, the interest rate on a fixed rate secured boat loan remains unchanged.
During the loan application and structuring process, applicants need to consider a range of personal financial issues to establish a loan repayment schedule that suits their financial objectives. Our Jade consultants assist and guide our customers but final decisions are always their own.
The fixed repayments can be locked in to an amount that best meets both borrower and lender requirements. The repayments are calculated based on the interest rate and the loan term and lenders do have guidelines around these loan elements.
Having lower fixed payment level may take pressure off the monthly budget but still provide for the option of making those additional voluntary payments if desired. If additional funds become available and the loan holder decides to contribute extra to their loan, this can be done by contacting the lender and advising of the intentions.
As most loans are established as direct debits, borrowers may need to ask the lender for the correct account into which to transfer the extra payments.
Effect of Making Extra Loan Payments
Making extra payments on a boat loan can have significant positive benefits and a few minor downsides to be aware of:-
- By paying more off a loan, the loan term is shorter so you own the boat sooner.
- Paying off the boat loan can mean less liabilities and reduced personal debt.
- Reduced debt levels can plan an individual in a better position when looking to apply for other loans and finance. The boat becomes an asset on the personal balance sheet rather than the loan be a liability.
- Making extra payments can mean saving on total interest paid on a secured boat loan.
- Paying off the loan sooner means shortening the loan term from the agreed term and as such attracts break fees. These fees are considered minimal in most instances. Ask your Jade consultant for details in regard to your specific loan.
Decision Considerations
It is important to note that any extra payments made on a boat loan can’t be refunded if the loan holder has a change of mind. The monies are deducted from the overall loan as additional contributions or they can be earmarked against future schedule monthly repayments. That means essentially making payments in advance. Discuss which strategy is right for you with your lender.
Interest rates on consumer finance are currently very low as a result of RBA monetary policy to boost the economy due to the pandemic. With low interest rate finance, essentially borrowers are paying a smaller than at other times, to effectively use the lender’s finance.
The savings on total interest payable on the loan will be less on a cheap interest rate loan.
Individuals always need to consider their overall financial situation when contemplating making extra loan payments. Specifically, could the money be used for other bills or as back-up for unexpected expenses?
Use the Calculator to see how different repayments
Loan seekers can decide at the loan application stage whether to request a lower repayment with a view to making additional payments if and when the opportunity arises in the future. To see how repayments may work out for the boat you are interested in purchasing, use our Boat Loan Calculator.
To discuss structuring a boat loan to meet your requirements with the possibility of make extra payments, contact 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.
