Compare boat loans

A boat loan works much the same as any other kind of personal loan. If your application is successful, your lender will loan you an amount of money known as the balance, and you will have a set period of time (known as the ‘term’ of the loan), to pay it back, along with interest, either at a fixed or variable rate.

Some boat loans will allow the borrower to make extra repayments and pay off the loan earlier than the date specified in the loan agreement. If you are keen to pay off your boat loan sooner than planned to save money on interest, it’s important to check if your lender charges any fees for making extra payments or any early repayment fees when the loan is paid off.

If you dream about weekends spent out on the water on a boat of your very own, you may be wondering about your options when it comes to purchasing one. Paying upfront is one possibility, if you have the funds available and are happy to spend them. If not, you might consider finance.

Pros of using a boat loan

Depending on your own needs and circumstances, some reasons you might opt for a boat loan include:

• You can keep your savings intact: Purchasing a boat outright could potentially involve a significant cash outlay. If you choose to take out a boat loan, then you will pay the balance off in increments, as well as any fees and interest payments, but you will still have access to cash in your savings in case you need it.

• You can get out on the water faster: Saving money to purchase a boat outright is an option, but if you want to set sail as soon as you can, then taking out a boat loan can be a way to own a boat sooner, and you can use money from your savings to fund your repayments.

Cons of using a boat loan

If you are considering using finance to purchase a boat, there are also some potential drawbacks to keep in mind, including:

• You will be taking on debt: A boat loan is a form of debt, and when you take out a loan, your borrowing capacity elsewhere could be affected. This may not present an issue for all borrowers, but if you are considering applying for a home loan soon, it’s worth keeping in mind that lenders will consider your existing debts when calculating how much they are willing to lend you.
• Buying with finance will be more expensive in the long run: When you purchase a boat with finance, you will pay it off over a period of time, potentially several years. You will also have to pay interest on the loan along with the principal. This means that, in the long run, you will end up paying more than if you had initially paid cash.

You can generally use a loan to purchase a new or used boat. However, there are some things to consider if you are buying used. For example, you may not be able to take out a secured loan to buy a used boat – a loan where the vessel itself will be used as collateral. For a secured loan your lender may only accept your application if the boat you are offering up as collateral is new or almost new.

This means that if you want to use a loan to purchase a used boat, you may need to take out an unsecured loan. This is a kind of loan that is not secured to any one asset as collateral, and  tends to come with a higher interest rate than a secured loan. This means that, while you may be able to get finance to purchase a used boat, it is possible that the interest rate on your loan will be higher than if you were buying new.

Boat finance brokers boatloans.com.au have some additional tips if you are planning to purchase a used boat. They suggest that if you are buying second-hand, it is important to properly check the condition of the vessel. You can ask to see relevant service and maintenance records, and if you want, you can even have an independent inspection carried out.

When weighing up boat loans, some things you might consider include:

• Whether the loan is fixed or variable: The interest rate on a fixed remains the same during the term of the loan, whereas on a variable rate loan it can go up or down, depending on the decisions of your lender and market forces. The kinds of loans available will vary depending on the provider, but when choosing a loan,you may decide you prefer the certainty or a fixed rate, or you may seek out a competitive variable one.
• Whether the loan is secured or unsecured: A secured loan is a loan that is secured against an asset. In the case of a boat loan, this would be the boat itself. If you are unable to make your repayments, your lender will have the right to claim the asset in order to recover their costs. In the case of an unsecured loan, a lender will not have a specific asset it can repossess but can take the borrower  to court to cover their costs if they cannot meet the repayments.
• The interest rate: This can also vary depending on such things as the provider, whether the loan is secured or unsecured, and your personal circumstances (such as your credit score and whether you have a loan guarantor).
• The comparison rate: This is a rate that takes into account both the interest rate and most upfront and ongoing fees, and is designed to give you a better idea of what the total cost of the loan will be per year.
• Fees and charges: Personal loans can come with a variety of fees and charges, such as application fees, monthly or annual fees, missed payment fees and early payment fees.
• The length of the loan term: The term is the amount of time you will have in which to pay off a loan. A loan with a longer term may have lower repayments, but it also means you will pay more interest over the life of the loan.
• Flexibility around additional repayments: Many lenders on Canstar’s database allow you to make extra regular and lump sum repayments. However, it’s important to check whether any additional fees apply for this.

When you apply for a boat loan, much like when you apply for any other sort of personal loan, you will be required to provide documentation such as:

• ID documents such as a drivers licence or passport to prove that you are aged over 18 and an Australian resident.
• Proof of income, typically in the form of pay-as-you-go (PAYG) payslips from your employer, to show that you earn a regular income that is sufficient to cover the loan’s minimum requirements.
• Your employment details for the past three years.
• Proof of savings, typically in the form of bank statements, to give the lender a picture of how you manage your finances.
• A list of any assets you own, including assets such as vehicles and property.
• A list of any debts you may have, such as other personal loans or home loans, credit card debts and credit limits, outstanding buy now pay later (BNPL) balances and the like.
• Details of your general living expenses, including groceries, utilities, streaming services, rent, medical and transport costs, school fees and so on.