I remember my grandfather always saying, “If you can’t pay cash for it, then you shouldn’t buy it.” It is great advice for smaller purchases (or if you have a very healthy bank account, or very rich and generous uncle!) but it is not really practical for bigger investments, like your home, car or boat.
Current interest rates are still at historically low levels, so a loan to purchase a boat is still a good option to get out on the water faster.
Savvy borrowers will do their homework before taking out a boat loan to ensure they have obtained the “best” deal available to them and their individual circumstances. The best deal does not always mean the lowest interest rate. The best deal may be a lender that will offer a longer term or lower monthly fees, or will offer minimal early termination (payout) fees.
Once you have decided on a loan from a particular bank or financier, the challenge is to work on strategies to pay the loan off earlier.
Loans for consumer or personal purposes normally have the interest calculated daily on the loan balance and debited against the account monthly. Commercial or equipment finance type loans generally work differently.
The general rule of thumb so you can pay your consumer loan off faster is to pay extra and more regularly. By paying an extra amount above your normal repayment, the balance of the loan reduces faster, which reduces the amount of interest you are required to pay back over time. Making weekly or fortnightly repayments instead of monthly payments also have the same effect.
Another advantage of paying extra money above your normally monthly repayment is that it will put your repayments in advance, so that should you ever find yourself in a position that you are unable to make your regular monthly payment, you will still be able to arrange a repayment holiday with your financier without fear of affecting your credit rating.
For those who overlook paying their repayments on time or paying less than the required amount the loan will take longer to pay back and you will pay additional interest, not to mention possible penalty or default fees. Paying additional amounts is a sound strategy to repay your loan faster.
Note that not all lenders have the option to make additional repayments. If this is part of your strategy to repay the loan early, check with the lender before you sign.
To see the effect that additional repayments make to your loan visit the Australian Securities and Investment Commission’s Money Smart online calculator: https:// www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/personal-loan-calculator#!how-can-i-repay-my-loan-sooner
Our experienced marine finance specialists at Credit One are happy to discuss any questions you may have regarding your personal circumstances and obtaining that boat loan or getting an obligation-free finance pre-approval in place.
We are also agents for Club Marine Insurance to keep your pride and joy covered.
So give us a call today on 1300 Credit (1300 273 348) or visit us online: www.boatloansfinance.com.au or email us: boats@creditone.com.au
