Where is the best place to get a boat loan?
With the sun on your skin and Australia’s beautiful waterways and coastline yours for the taking, owning a boat, jet ski or other watercraft opens up a world of possibilities. You can go on fishing trips with family and friends, get the adrenaline pumping as you take to the waves or set a course for adventure, armed with cool drinks and warm smiles.
But splashing out on a new boat doesn’t come cheap even if it’s a second-hand model. So many Australians turn to boat finance to buy their dream vessel without breaking the bank.
How does boat finance work?
Financing a boat is similar in many ways to car finance. You need to borrow money to fund the purchase. So, in exchange for getting the money from a lender, you agree to pay back the original sum borrowed plus interest via regular repayments.
The boat loan can:
- Be secured or unsecured
As a secured boat loan uses the boat as collateral, lenders usually view the deal as less risky than an unsecured personal loan. So you might get better terms such as lower interest rates and higher loan limits when compared to an unsecured loan.
- Have a higher interest rate or a lower one
The interest rate you get charged on the boat loan reflects the risk the deal poses to the lender. However, as rates can vary widely from lender to lender, it always pays to compare the market to find the best deal possible.
- Have a shorter term or a longer one
The maximum loan term is generally 7 years depending on the type of vessel being financed and its age. A longer term can reduce your monthly repayments so they are more affordable. However, they typically come with higher rates than shorter terms and can mean you pay more interest over the loan.
- Include a balloon payment
A balloon payment is a lump sum that you pay at the end of the loan’s term. Boat loans with a balloon payment typically offer lower monthly repayments but you can end up paying more over the loan’s term.
What’s the best way to finance a boat?
Going direct to a lender can limit your options. That’s because boat loans are often considered a more specialist product, more akin to a caravan loan than car finance. As a result, not every lender offers them, making your search for the right loan more challenging.
As a result, you may only be offered boat and jet ski finance through an unsecured personal loan. Unsecured loans aren’t generally the cheapest boat finance around. They tend to come with higher interest rates and shorter terms when compared to a secured boat loan.
The lender may also suggest putting your boat on your home loan, as this is usually one of the cheapest ways of borrowing money. But while this could give you a low rate, remember you’re taking on long-term debt for a depreciating asset (the boat). And what this means in practice is potentially paying more in interest over the life of the loan than if you’d found specialist marine finance.
Dealership finance is often convenient, requiring little effort on your part to arrange the loan. However, you often pay for this convenience – as dealership finance can come with higher interest rates than other solutions on the market.
Finance brokers work with many lenders including marine specialists. They can compare all your available options on the market so you get a competitive rate and terms that suit your needs and circumstances. Even better, you can even get money for essential accessories included in the loan amount so you get on the water faster.