Boat Finance Terms Explained
At 360 Boat Finance, we want to make sure you have all the information you need to make an informed decision about your boat loan. This is why we have a detailed list of boat finance terms and their definitions so you know exactly what to expect throughout the process of finding and obtaining a loan.
While you are visiting our website, use your new found knowledge to access our helpful tools such as our boat loan calculator to find the best boat loan options for you.
Boat Finance Terms
Unsecured Boat Loan – An unsecured personal loan involves the lender providing a loan without taking any security. The security could be the boat itself or some other asset. Therefore, the boat is in your name completely. This is also often referred to as a “personal loan”. Therefore, if you are hoping to buy a boat, an unsecured personal loan could be the best choice for you. If you think an unsecured loan is the right choice for you, speak to our team at 360 Finance.
Secured Boat Loan – A secured loan is where your lender holds your new boat or another asset as security. Therefore, they keep a stake in ownership of your boat until the loan is paid off. The asset is at risk or being liquidated if you are unable to pay the loan however this risk is outweighed by the lower interest rate you will receive compared to a loan that is unsecured.
Hire Purchase Loan – A hire purchase loan is where the person acquiring the loan agrees to pay for the boat in parts over a set period. This, therefore, means you hire the goods over this time and the boat is not owned by you until it has been paid for in full. The lender purchases the boat on your behalf and gives you use of the boat in return for regular loan repayments. You will own the boat once all repayments are made.
Lease Financing – Much like the hire purchase loan, the lender purchases the boat and you make payments for use of the boat, however, unlike the hire purchase loan, the lender retains ownership of the boat and you have no ownership rights over the asset. Therefore, lease financing essentially involves renting out the boat, giving you the ability to use it without owning it. If you can’t afford to purchase a boat right now or if you are not ready to take the plunge but you need a boat to use, this is your best choice!
Loan Amount – The loan amount is the total sum of money the borrower agrees to pay back on their loan. A maximum loan amount is the highest amount of money that can be borrowed. The value of your vessel, the borrower’s credit history and other factors including the loan program selected are all considered when determining the loan amount to be paid.
Assets – An asset is anything that has a monetary value which is owned or that you take a loan out on to own in the future. Your assets can include your boat, car or your house.
Term / Length of the Loan – Also referred to as the life of the loan, the term of a personal loan is the duration of time you have been given to pay off the loan. Your loan term could be 3 years or 5 years for example. Try out our boat loan calculator to see which loan term is best suited for you.
Balloon or residual payment – A balloon payment, also known as a residual payment is the final lump sum owed to the lender after your regularly scheduled payments have been made. Balloon payment provides you with some flexibility in regards to how much is paid throughout the life of your loan. Often the balloon payment is larger than the monthly payments and the monthly repayments can be smaller depending on how large the balloon payment is. Once the final Balloon payment is made, it is time to celebrate because the boat is now all yours!
Pre-approval – Pre-approval is the process that takes place before approval is received that determines if a loan will be qualified. This will include receiving confirmation of income as well as a credit check. At 360 Boat Finance, the pre-approval process will be completed in just 10 minutes so that you can get your boat loan sooner! It is always important to have your boat finance pre-approved before shopping for your boat so that you know your price limit and dealerships are also more accommodating to individuals with pre-approval.
Fixed Interest Rate – A fixed interest rate requires you to pay a fixed amount towards your loan that does not fluctuate over the life of your loan. This fixed interest rate is locked in for an agreed period. A fixed interest rate gives you certainty in your repayments, making it easier to budget for when you know how much you have to pay.
Variable Interest Rate – A variable interest rate fluctuates over time due to the rate being reliant on an interest rate index that changes periodically. The biggest benefit of a variable interest rate is the potential that the interest rate will decline over the period, resulting in lower repayments.
Comparison Rate –The comparison rate will help to identify the true cost of your loan by combining the interest rate with the fees and charges related to the loan. This will provide you with a single percentage figure to help you determine exactly what you loan will cost over the life of your loan.
Boat loan calculator – Our boat loan calculator is a tool that you can use to determine if you can afford to purchase a boat. To use a boat loan calculator, enter your desired loan amount, loan term and interest you are expected to pay into the calculator. This tool will then display your repayments for weekly, fortnightly and monthly repayments as well as the principal, interest and balance amounts.
Settlement – Your boat loan is not finalised until settlement. The settlement is the final agreement between the person taking out the loan and the lender where the loan is legally agreed upon by both parties.
At 360 Boat Finance, we provide same day settlements so you can complete the process and purchase your boat sooner rather than later.