The Coronavirus (COVID-19) pandemic has just about everyone reviewing their financial situation as both business and personal incomes take a hit from economic impact. If you have a boat loan on your recreational boat or a marine finance package on a business vessel, refinancing your loan arrangements may be an option for improving your overall financial position.
Refinancing means establishing a new arrangement on the balance on an existing loan.
It may involve:-
- Moving your loan to another lender
- Establishing a new arrangement with an existing lender
- Changing the type of business finance product, eg from Chattel Mortgage to Leasing
The primary objectives of refinancing a boat loan tend to be:-
- Take advantage of a lower interest rate
- Achieve a lower repayment to ease pressure on household budget or business cash flow
- Change in business circumstances requiring different commercial finance product
- Restructure a loan portfolio by combining several loans into one finance package to streamline business finances
Whatever your individual objectives, we’re outlining the process, benefits and considerations that you should be taking into account.
Historic Boat Loan Interest Rate Levels
Well before COVID-19 impacted the economy, interest rates were heading south to historic low levels. In response to the crisis, the RBA lowered the cash rate even further as part of monetary policy to stimulate the economy.
Many lenders have responded by lowering lending rates on some products. If you established your boat loan or marine finance package at a much higher rate, you may benefit by refinancing the remainder of your loan to the current lower levels.
To calculate what your estimated repayments might be on your boat loan balance at the interest rate that we are offering today, head to our Boat Loan Calculator page to work out a rough ballpark.
Loan Cost Considerations
Before jumping in to contact Jade to refinance based purely on lower interest rates, you need to consider the costs of refinancing, eg fees and charges applied to your loan and any break fees which may apply.
- For secured personal boat loans on a fixed interest rate minimum break fees apply and your Jade consultant will work in your best interests to negotiate these down with the lender.
- If you chose an unsecured personal loan to finance your boat: if the loan is at a variable interest rate then no break fees will apply. But you may already be receiving the lower interest rate anyway.
- For businesses, payout figures need to be considered and your Jade consultant will work with lenders to minimise any fees and charges where possible.
The only way to get a complete picture of how refinancing will be of advantage to you is to ask Jade for a firm quote based on your individual circumstances.
Loan Payment History
Refinancing your boat loan will involve your Jade consultant sourcing you a new loan. Lenders will be looking at your credit report so you need to ensure that you have been making your repayments on time consistently
Income Variations
COVID-19 has left meant many individuals have been stood down from their jobs and will be registered with the JobKeeper programme. For refinancing personal boat loans at this time, lenders will be looking closely at pre-COVID income levels, projected income over coming months and your post-COVID prospects for returning to your usual earnings levels.
For businesses, you will need to demonstrate to lenders your plan for trading through the crisis and prospects for ‘the other side’, taking into account what government stimulus packages your eligible to receive.
Assessing Financial Hardship
The Government has had extensive discussions with banks and lenders to extend as much support as possible to both individuals and business to cushion the financial impact of the coronavirus crisis. One of the key initiatives that lenders in general have adopted is to offer a 6 month deferral of loan repayments across many loan categories and to many borrowers.
- If you have already or you intend to apply for a deferral on your existing loan, this may appear as ‘hardship’ to some lenders and may impact your refinancing prospects. Based on standard lending guidelines, lenders are not usually prepared to extend finance under hardship situations.
- We have been advised, but it cannot be taken as a blanket decision, that accepting a 6 month repayment deferral will not impact negatively on credit reports.
- It may be worth considering if it is more advantageous to your personal situation to refinance to a lower repayment level rather than seek a repayment deferral on an existing loan.
- It may also be advisable to seek professional advice on your overall situation from your financial advisor.
Boat Refinancing Options
Refinancing your boat loan will be organised by your Jade Boat Loan consultant in a similar way to organising an initial boat loan.
The options you may consider include:
- Taking advantage of a lower interest rate to reduce repayments over the same loan term.
- Decreasing repayments and extending the loan term.
- Increasing repayments and shortening the loan term.
- Using your existing funds to payout part of your existing loan, refinancing a smaller balance and reducing your overall debt obligations.
- Change your commercial finance product to achieve a different set of benefits in regard to GST, tax deductibility and balance sheet strategy.
If you would like to discuss boat refinancing your personal or business marine finance package, please contact a Jade consultant for a confidential conversation. Call 1300 000 003
