Get the right boat finance, save money and enjoy your boat for years to come!
Regardless of what you have read or are told from finance companies. Finding the right boat loan comes down to a few simple factors, just like any other finance.
Getting approved with a low rate and flexible terms comes from a combo of the below.
- The age of the vessel?
- Deposit or not
- Commercial or recreational usage?
- What your financial situation says you can afford
- What your credit looks like?
Fortunately, there are numerous boat loan options available to compare for all situations. There are also different strategies to use when considering which to apply for.
Common Boat Loans: Options, Rates and Lenders
There are multiple options that a majority of borrowers use when financing a boat. Below are different scenarios along with tips on things to consider.
Can I Get a Boat Loan if I Have Bad Credit?
Having less than perfect credit does not remove your ability to get boat finance, but it does reduce or change your options. Most of the finance outline above will still work, however your terms and rate will be impacted. Expect a higher rate and possibly different purchase restrictions.
Important Financial Considerations With Boat Finance
Whilst finance in its simplest form is straightforward, there are multiple loan types and features that should be compared and understood. Below are some of the main areas to focus on. The fine print to really save money and not get caught out down the road.
Speaking with a financial professional like a broker is a great way to understand the ins and outs of all options whilst also comparing the market.
Fixed or variable interest rate boat loans
A fixed rate is just that, your boat loan rate and repayments don’t changed…they are fixed. Most boat or vehicle dealerships primarily provide fixed rate loans. Note that these loans often have a early exit fee should you pay off the loan quicker. This can remove any benefits of a lower rate, should you have one.
Variable rates are the opposite and can change if the lenders interest rates change…this can be either up or down. Variable rate loans usually don’t have an exit fee should you want to pay out the boat loan early. This can be a good option for those planning to make extra payments or paying off the boat finance early.
Secured or unsecured boat loans
The majority of new boat loans are secured. The boat or marine vessel serves as the security for the loan. If you don’t repay your loan on time, the lender can repossess your boat and sell it. This can also have serious implications for your credit score.
Unsecured loans (personal loans) are mostly suited to used boats. They can be used to purchase and vessel but usually have a slightly higher rate compared to secured loans.
Understand what balloon payments are
You may have heard of a ‘balloon payment’ but are unclear on exactly what it is and how they work. Some boat loan lenders may offer a ‘balloon payment’ (otherwise known as a residual payment). This means you make a normal payment for a set period and then must pay off the balance in a lump sum (balloon payment) at the end of the term.
The purpose of this product is to give the borrower a lower repayment for a set period. However once the repayment term has ended, you’ll have to pay the final lump sum of the loan including the interest it had accrued, therefore the overall cost of the loan can be greater.
This is where the quality of the boat loan really matters!
Whilst the rate of a boat loan is important, other factors can quickly remove any benefits of a lower rate, making the overall cost of the loan higher! When considering finance here are some key features to review.
Loan Term: The length of a loan can have a positive impact on rate. Shorter boat loans tend to have a lower rate as the lender can expect their money back quicker. Longer term loans do receive competitive rates and lower repayments, however or more costly due to more interest payments.
Monthly/Annual Service Fee: This may also be known as a documentation or statement fee, a charge some lenders require for administration work involved in managing and creating your statement each month.
Comparison Rate: When looking at a boat loan be sure to pay attention to the comparison rate. This is the true cost of the loan that includes the interest rate and fees.
Missed Repayment fee: This is a straightforward fee associated with most loans. In certain cases you may be able to get the fee waived if you have a good record of payments.
Application Fee: This is the fee for applying for the loan. In some situation it can be negotiated or even waived.
Loan Conditions: Certain boat loans have more flexibility than others. The main condition is often around the age of the boat or non-factory modifications.
Early Repayment Fee: Yes, some lenders will charge a fee for paying down a boat quicker. Typically associated with fixed rate loans.
Apply For A Boat Loan – IMPORTANT
Applying for a boat loan is easy and can be done online with most lenders. However, many borrowers are unaware of the impact of applying to multiple lenders in a short period of time. This can negatively reduce your credit score. When considering a loan, it is important to have minimal application submissions.
If you are unsure you will qualify with a lender or are considering multiple lenders. There are two popular ways of protecting your credit score and finding out which boat loans you will be approved for.
A broker will have access to a large lending panel which will include big banks, regional banks, non banks, specialist lenders and more. After a broker reviews your borrowing status, they will be able to provide you with genuine options.
The other is to get a soft credit enquiry which provides a strong understanding of your credit profile without actually pulling your credit. A broker can also do this for you.
The above will give you a accurate understanding of your credit score, so that you may submit an application for a boat loan with confidence.
Boat Loan Calculator
Boat loan rates and terms can vary based on the type of finance you require. Before you apply, be sure the numbers work and are affordable. Use a boat loan calculator to figure out the real cost of a boat loan and whether it will fit within your budget.
Note: The results of this calculator are indicative. It is for illustrative purposes only and is based on the accuracy of the information you have provided. No result from the use of this calculator should be considered a loan application or an offer of finance. The calculator does not take into account your personal circumstances. You should not rely on this calculator for the purpose of making a decision whether to apply for finance.
Don’t forget the other costs associated with boat ownership:
These costs involve the purchase of accessories such as ropes, anchors, safety equipment, training, electrical equipment and more.
Here are some additional expenditures that must be considered, such as insurance, maintenance, cleaning, fuel, boat licenses and any required training.
General Boat Finance Eligibility
To qualify for a boat loan you must fit the following criteria.
- Be a permanent resident or citizen
- Be 18 years or older
- Earn a regular income (PAYG or Self employed)
- The stronger your credit profile, the better the rate & approval
- A deposit opens more options but is not a requirement
If you can tick all of these boxes, it’s likely you’ll be eligible for finance.
Looking For The Cheapest Boat Loan?
If you’re searching for boat financing, you may believe that applying for the cheapest boat loan available is the way to go. It’s worth noting that choosing the lowest interest rate does not automatically guarantee you will receive the best boat loan offer in total.
The upfront and monthly costs might reduce the amount of money you save in interest. For instance, a boat loan with a somewhat higher interest rate that allows you to make extra payments and pay off the loan early without penalty might be more suited for certain borrowers’, allowing them to reduce the overall interest paid by paying of the loan quicker. Always check and compare the comparison rate of loans as it takes into account all costs of the loan.
Also, be cautious about boat loans that appear to be inexpensive but have a balloon payment attached to them. This is lump sum payment at the end of the loan term that can considerably raise the overall cost.
Best Boat Finance Rates in Australia
Your best option for a boat loan interest rate will differ depending on your personal finances, credit and boat type.
The interest rates on variable rate boat loans change based on the Reserve Bank of Australia’s (RBA) cash rate and the market. If the RBA raises or lowers the cash rate in a month, the interest rate on a boat loan today may be higher or lower..
Lenders will assess your financial situation and credit history to determine rate and approval. Good to excellent credit will see you get the best rate. If your credit rating is poor, you’ll either get approved at a higher rate or not at all.
The interest rate you receive will be determined by the type of loan you take out, such as whether it’s a fixed or variable, and whether it is secured or unsecured. Secured boat loans have an interest rate of 2.99% to 10%, whereas unsecured boat loans have an interest rate of up to 15%. The large gap between the two loans is based on one using the boat as security for the loan and the other not.
Speaking with a broker and your account is a great way to quickly understand what option is ideal for your situation.
Commonly Asked Boat Loan Questions That Help!
In addition to above boat loan information, below are commonly asked questions for first time boat buyers or next boat purchasers looking for the best boat loan deals and other considerations of purchasing a boat.
Everything from operating costs, registration, insurance and other elements of purchasing and owning a boat that many may over look.
Can you get finance for any type of boat?
In most situations, no matter what sort of boat, jet ski, or marine vessel you want, you may get a loan. While some banks may not provide financing for all types of watercrafts, there are specialist lenders that do. Loans are available for both new, used and unique marine vessels and boats. If the age or condition of an older boat do not meet the requirements for a secured boat loan, there are unsecured personal loans available.
Can I get finance to purchase a boat from a private seller?
Yes, there are options for any type of boat purchase. Financing is available for boats on sale from private sellers. The type of boat loans available will vary based on the price and quality of the boat, your financial situation and credit rating.
What boat loans are available for those who are self-employed?
There are options for self-employed borrowers that want to finance a boat or other marine vessel. Self-employed loans require the same information as any loan application. The process just may require a bit more documentation around income and expenses an possibly proof of assets in order to get approved. Consider low doc or no doc loans, a boat finance broker can assist with all options.
Will the location of where my boat is stored or used affect my finance?
No. The interest rate and terms of the boat loan application are not determined by where you live or intend to use your watercraft. However, your insurer may have higher or lower costs based on area of usage and/or storage.
What is the cost of boat insurance and boat registration?
The cost of boat insurance is determined by the size and type of boat being insured, as well as the coverage you select. Many sources state an average of around 1.5% of the boat’s cost – however this is just a estimate. Accurate insurance quotes are dependant upon many factors that will be unique to each policy holder.
Registration varies from state to state or territory. Basically any marine vessel with a 5hp or more in Australian waters must be registered, including sailing vessels over 5.5 m.
How long can I finance a boat for?
The finance term for boat loans will vary from lender to lender but generally go up to 7 years. For larger boats that may be used for a place of residence, the terms may be similar to that of a home loan.
I have a ABN, can I qualify for a business boat loan or commercial boat finance?
Having a ABN does not automatically qualify you for or mean your eligible for a business boat loan. The watercraft being purchased must be used primarily for business purposes. You will also need to provide necessary proof of the usage of the boat or marine vessel in a commercial activity.
General eligibility for a business boat loan includes: An active ABN and business documentation such as latest BAS statements, business accounts, business tax return and other financial information depending on lender.
Alternatively, low doc or no doc business boat loans are also available for those wanting to skip the documentation process. Speaking with a marine loan broker and your accountant is the quick and convenient way to navigate through the best business boat finance.
Is the rate provided by the manufactures the best?
Although manufacturers might quote a low rate, there is generally a catch. As an example; The lower the rate = less to no negotiation power on the purchase price. Always start by negotiating the price before discussing how you will repay it. Also, remember to compare off of the comparison rate and not the advertised rate!
What is the Personal Property Security Register (PPSR)?
This is an especially important search for those looking to purchase a second hand boat or marine vessel. The PPSR is a record of financial interests in cars, boats, and caravans kept against assets. Prior to purchasing a boat or watercraft, including trailers, check the PPSR to see whether any loans are currently outstanding on it. This will insure that you will be the sole owner of the vessel.
Do I need to have a boat inspection to get finance?
If you are taking out a secure loan with the boat or marine vessel as collateral, then most lenders will require a boat inspection prior. For purchasers using a unsecure personal loan or other none secured finance it may not be necessary.
However, it is highly recommended you hire an expert to inspect a used boat so that you are fully informed about its condition and avoid a lemon. The last thing you want is to find serious issues with your boat or craft whilst out on the water