DOLLARS AND SENSE
When considering your first or next boat purchase, evaluating finance options is not always high on the list of priorities, although it should be. MARK O’DONOGHUE outlines a checklist of things to consider when looking for boat finance…
Just as the boats you’re looking at come with many power and accessory options, there also are many more finance options available than you might have thought. In fact, choosing the right finance package can potentially make a pleasure boat more pleasurable… or can help a commercial or charter vessel be a better business proposition.
It’s a good idea to get your finance in place and obtain a pre-approval for your loan before you go shopping. It’s wise to submit an application for a hypothetical boat for a given sum of money and, once it’s approved, you can confidently negotiate on a boat knowing the finance is ready to go. This should be a completely obligation-free service, so if you eventually decide not to take up the finance, there’s no charge.
To get a feel for affordability, many boat listing websites offer interactive financial calculators to provide an indication of what the repayments on your loan would be.
SOURCING BOAT FINANCE
Sourcing the right finance solution is not as easy as popping down to the local bank for finance. It can be well worth enlisting the services of a specialist finance broker experienced in boat finance who understands the unique dynamics of boat finance.
There are different ways to finance boats, whether it’s a runabout, luxury cruiser or charter boat. So, in looking for funding, there are some handy pointers you should keep in mind.
First you need to ask yourself some questions: How long you are likely to keep the boat? Will it be purely a pleasure boat? Could there be some business use?
When it comes to evaluating one finance proposal over another, your broker should make you aware of obligations such as your minimum commitments, the loan’s security and any special conditions that apply.
It’s also a good idea not to limit your options by securing your boat loan against real estate. If you are using your existing bank, chances are the bank will want to ‘cross collateralise’ the loan against your home or other assets. When you deal with a specialist boat finance broker the boat should stand as its own security in 99 per cent of instances.
Also, don’t put all your loans with the one financier. If you have your home loan with one lender, for example, think about going with someone else for your boat, another for your car and so on.
At the present time , credit markets are still tight, so you’ll need a watertight case to secure funding. This is where a good broker acts as your advocate in presenting your case to a financier and securing the funds you need.
Once you have your funding in place and have the paperwork, take a good look at the detail. Always check the payments to ensure you are getting the interest rate you think you are and be sure to read all the fine print. Often, boat finance contracts are entered with the borrower having little or no appreciation of the long-term commitments.
Before signing on the dotted line, take extra care to ensure you understand the structure of the loan and repayment commitments; whether there are any early termination costs; what the interest rate is; and whether the loan secured by just the boat.
LOAN APPROVAL CHECKLIST
Here’s a checklist of things lenders will be looking for when approving your loan:
- Your capacity to meet the repayments based on your income
- For 100 per cent finance you need to prove you have ‘tangible’ net worth (ie. equity in property or investments). Our financiers do not want a mortgage, but will simply want to feel comfortable that you have the ability to make good any shortfall between the second-hand value of the boat and the amount owed.
- A good credit history
- Stable employment and income