The Why and How of Boat Finance

Getting out on the water is one of the luxuries of living on our island continent, but a leisure craft doesn’t need to be unaffordable. Boat finance may be more accessible than you think!

If you’re fishing for information on the ins and outs of how a boat loan works, let us cast our knowledge on boat finance and how you can launch your own loan application for a boat.

Boat financing explained

Boat finance works in pretty much the same way as a car loan when it comes to lending money to buy one. Here’s more of what you need to know about boat loans:

Shop around

If you’ve got your boat licence and want to get out on the water with your marine mates, or if you’ve previously owned a boat, you’ll probably have a pretty good idea about what type of vessel you’re looking for. Figuring out the price point of your desired boat is the first step, then look at your affordability and what loan amount you’d likely be applying for.

Different lenders will provide different loan amounts for their boat loan products. A luxury catamaran will come at a very different price point to a cabinless motorised fishing boat, so it pays to know what the minimum and maximum boat loan amounts are before getting your heart set on something you can’t borrow money for!

Budget for the overall cost of boat ownership

Similar to car ownership, the full cost of owning a boat is more than simply the purchase price. Depending on the size of your vessel, you’ll need either a boat trailer or to organise a place for it to be moored. Often, trailers come with the boat as a package when being sold (especially a used boat from a private seller), but in some states, such as Queensland, registering the boat and the trailer are two separate registrations and thus two separate fees.

Of course, then you have fuel, storing the boat, all your safety gear, boat insurance, and if you’re financing through a loan, you’ll have to factor in the loan repayments to your budget.

Look at your boat finance options

It’s tempting to want to dive straight in and compare loans for boats, but first, you need to know what you’re looking for in boat finance. Simply searching for ‘low-rate boat finance’ may not provide you with the full boat financing results that you really need. Similar to personal loans, there are a few different loan options for boats that you should consider, to know what’s going to be best for you.

Unsecured loans vs secured boat loans

You might already be familiar with these terms, ‘unsecured loans’ and ‘secured loans’, particularly if you’ve ever looked into car loans. They’re important to think about before you go for any type of personal loan, including a boat loan! That’s because secured loans for boats will use the boat as a form of security in case you default on the loan and can’t pay it back, which could help get your boat finance approved or even score you a lower interest rate. An unsecured loan, on the other hand, represents more risk for the lender, as there is no fallback if you default on your repayments and can’t repay the loan. 

Balloon payments

Balloon payments are one way to help make your boat finance more affordable in the early days. A balloon payment is essentially an agreed amount that you’ll pay back as a lump sum at the end of the loan period. What this means for you is that you could lower your repayment amount, allowing you to save money throughout the life of your loan, including being able to cover the balloon payment at the end.

Secured boat loan terms and minimum loan amounts

Your loan term for boat finance may be restricted by some lenders, for example, if you really wanted a seven-year loan term, some lenders may only offer their loans for a maximum period of five years. Similarly, the minimum loan amount may be set at, say $10,000, whereas your budget only permits purchasing a $7,000 boat.

Ability to pay off your loan early

Paying interest over multiple years on top of ongoing fees does add up, which is why it’s sometimes a good idea to make additional payments where you can, to help reduce the interest charges and get your loan paid off quicker. Not all lenders that provide boat loans are able to offer flexible repayments, the ability to make extra repayments or even pay off your loan early. Some do, but then charge an early termination fee or early repayment fees for doing so! 

The great thing about Finance One is that there are no early termination fees or early repayment fees on any of our consumer loans, meaning you can make extra payments or pay out your loan early with no extra fees!

How your credit rating affects your boat loan application

Finance specialists who offer loans for boats and jet skis often have strict lending criteria for their applications. This can often mean that those with a poor credit score aren’t given a look in or are led astray when it comes time to apply the interest rate, where the estimated monthly repayment is far more than they thought.

If you’ve weathered some rough seas when it comes to your personal finance in the past and it’s left you with a less than ship-shape credit score, then solely relying on the comparison rate (which shows the true cost of loans) could be misleading. Often, the competitive interest rates advertised only apply to those with a good credit history.

Normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.

Finance One means:
Fin One Pty Ltd – ABN: 80 139 719 903
Australian Credit Licence: 387528

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent advice regarding your legal, financial, taxation or other needs, to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. All loan applications are subject to normal lending criteria. Fees and charges payable. Terms and conditions apply.