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With many options to finance the purchase of your boat we take a look at the option of a personal loan.
Unsecured personal loans are offered by lending institutions such as banks and building societies and are so called because the lender requires no security for the debt. A personal unsecured loan is a common way to purchase a boat and repay over a set amount of time.
Personal loans are not available for business purposes.
Depending on the individual lender some other purposes may also be excluded, so check first. It many be advisable to not state that the boat your wish to purchase will be for residential use as many will not lend for residential, only recreational.
Personal loans are available for different amounts and repayment periods. Depending on the amount and purpose of the loan, you will be able to choose from a number of repayment periods. Larger loans such as those over £10,000 can usually be taken over longer terms of 7 to 10 years. The minimum loan amount is typically £1,000. The maximum is £25,000, although this will vary between lenders.
The amount borrowed is subject to an interest charge, and the interest rate applied is known as the Annual Percentage Rate (APR). Generally, it is advisable to compare the APR's of different products to compare how competitive they really are. It is not unusual for lenders to offer different APR's depending on how you apply e.g. by telephone may receive a higher APR than those done online, so do your research for the best deal.
The other option is a secured personal loan. Unsecured loans are almost always cheaper for those with decent credit scores, but secured loans provide lenders with security, so they’re more willing to lend to poor credit scorers. Secured loans are rarely a good move, and should be considered as a last resort. They’re only applicable in very limited circumstances. Those with reasonable credit scores should consider a personal loan or extending their mortgage instead. Chances are you are moving onto a boat to give up your house so getting a secured loan my not be a good idea unless you are renting out your property.
If you are looking for a low cost loan, comparing the APR is a must. Lenders quote interest rates in different ways, and it's worth familiarizing yourself with these before you start:
- A fixed interest rate will stay the same throughout the term of the loan. This means your monthly repayments should always stay the same, allowing you to budget.
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- A variable interest rate may rise and fall in line with any changes to the bank base rate. This could result in your monthly repayments changing during the loan period.
In addition:
- A typical interest rate is an indication of the rate you will be offered as it is the rate that over 66% of successful applicants receive. The exact rate offered to you will be dependent on the loan amount, the term and on an assessment of your personal circumstances.
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- A set interest rate is offered to all successful applicants, regardless of the risk, the loan amount and term.
Although lowest APR is one factor that contributes to a ‘cheap’ loan, you should always pay attention to the small print as any additional costs will be found there. Some lenders do apply an early settlement charge if the debt is repaid in full before the end date. This can be up to 2 months interest so it pays to check this out before you commit. If you think you'll clear the debt before the end of the term then your best with a no early settlement costs product, even if the APR is higher. You may find that your out goings are less when you have moved on your boat so would be able to pay more towards the loan to pay it off quicker. If this is the case make sure the loan you get is flexible to achieve this.
Personal loans are repaid on a monthly basis. If there is a degree of flexibility then the lender may permit over-payments and lump-sum payments, both of which allow you to clear the debt over a shorter time period than first agreed.
Getting accepted for a personal loan can sometimes prove difficult if you’ve got bad credit, have changed addresses frequently, have no previous credit history or are self-employed. There are lenders who can help those who need loans and those who have difficult personal circumstances. The APR is likely to be higher than that offered by others, but the chances of getting accepted are far higher.
Personal loans are governed by the Consumer Credit Act 1974. The Act contains strict regulations about how money is lent and covers unsecured loans up to £25,000. When taking out a personal loan you will need to sign a credit agreement, and you'll be bound by it's terms and conditions. As extra protection for both yourself and the lender, payment protection insurances are available and these will cover your repayments in the event of sickness, accident or unemployment. In the event of your death your debt could even be repaid in full. Although these policies give you peace of mind, they can be costly with both the cover and cost varying between lenders. You should always check what a policy includes and excludes, as this may affect your decision to take it out. Stand-alone policies are available and these may prove better value than the policy offered by your personal loan company.
Financing your boat with a personal loan can be a good option. Do your research well and read all the small print to be sure that you are getting exactly what you want. There is much information available on the subject so it pays to do your research so the purchase of your new boat goes without a hitch.
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