The interest rate is a key component, though not the only factor to consider, in a boat loan. Having a general understanding of interest rates will not only add to your knowledge bank but also be helpful when you are sourcing boat finance.
- Interest rates on personal (consumer) boat loans and commercial (business) marine finance usually differ. Business rates are usually lower as lenders see businesses as more secure borrowers.
- The interest rate on different goods will vary. The interest rate on say home loans will rarely be the same as say boat loans or car loans. Lenders see different value and security in the different types of loans.
- There are two categories of interest rates: fixed interest rates and variable interest rates.
- Most commercial boat finance will be at a fixed interest, unless a special request and special arrangements are made with the lender for a variable interest rate loan.
- With personal boat loans, secure boat loans have a fixed interest rate and unsecured personal loans are set with a variable interest rate.
- A fixed interest rate enables the borrower to know what their repayments will be over the loan term. The interest rate for their loan remains the same as the day the loan was established, regardless of whether or not interest rates on boat finance change over that period.
- The interest rate is a major factor in a boat loan but should not be considered solely when deciding on a lender. A cheap interest rate loan may have high fees and charges. The repayments will provide a better basis for comparison as that will have taken into account all fees and charges applied to the loan.
- All ads for consumer loans will advertise a Comparison Interest Rate as well as the Interest Rate. This will be accompanied by an explainer which is a specific example of a loan for specific goods, ie a specific boat, at the interest rate advertised, over a specific loan period. When all fees and charges are factored in, the result is the Comparison Interest Rate. When comparing interest rates on consumer loans, borrowers should always compare the Comparison Interest Rate not only the stated rate.
- Banks and other lenders will all ‘price’ boat loans differently and that results in a variation in interest rates from lender to lender. A lender’s interest rate will also reflect the price that they have to pay for their own funds.
Sourcing the Best Boat Finance Interest Rate
Sourcing the cheapest interest rate for your boat finance is an essential step in acquiring the best boat loan possible. If you approach the bank or finance company yourself, you will most likely simply be offered their current advertised rate with no room to move. These institutions have strict guidelines and rarely negotiate on interest rates directly with customers.
However, they do negotiate with finance brokers. A finance broker that specialises in boat finance is ideally positioned to negotiate you a better interest rate on your boat loan – personal or commercial.
A broker should also have industry-only lender sources which very often offer even better interest rates than the banks advertise.