So you’ve decided to buy the new float you have been eyeing off for a while now. You’ve researched how much the repayments will cost you and have everything ready for the bank to approve the loan quickly. You’ve used the bank since you were a child and they’ve looked after you on your car loans and credit cards.
So when the bank comes back to you with a “No” or offers you an unsecured personal loan is where things start to go haywire. Your repayments are more than you’ve budgeted for, the loan term is not what you expected, they want to consolidate existing debts and what’s this loan insurance thing they’re talking about?
Traditionally banks accommodate borrowers for homes, cars, credit cards and personal loans, so when applying for horse float finance, they don’t have the facility to hold lifestyle assets on their books.
Floats are customised to the individual’s lifestyle and horses needs. Usually a float that suits one person isn’t going to suit the next. If the borrower defaults on their repayments, trying to resell a float to a suitable buyer is not easy. If a bank provides a personal loan, then they can simply default the borrower to recoup the funds.
Want VS Need:
Horse Floats are a specialised lifestyle asset and unlike motor vehicles are considered more of a want rather than a need item. Motor vehicles are used every day to get to and from work etc, where as a horse float may be used once every month. For this reason alone, floats can be susceptible to weather damage and if not maintained correctly, heavy wear and tear.
As with all lending, banks assess loans based on risk. Banks know that if a borrower defaults on a car loan, they can sell it to recover the loan. If the borrower is strong enough to borrow without having to use security against the loan, then they will provide an unsecured personal loan and base the risk against the borrower. The disadvantage of unsecured loans are they generally attract a higher interest rate due to the nature of the risk. The benefit of unsecured loans is that the borrower can use the funds for any worthwhile purpose.
So how do you achieve a low rate loan for your next float?
- You need to engage the services of a professional finance consultant. They should know the guidelines for banks and lenders so as to find a lender that will be suitable for your needs and budget. A finance consultant can save you placing unnecessary loan applications to banks in the hope they will provide you with the answer you’re looking for. This can save your credit history and credit score as too many loan applications can adversely affect your ability to gain future credit. Even if you “just wanted to see what they could do for you”
- You could package your next float purchase in with your home or property. With mortgage interest rates being so low, it seems like a sensible idea to roll the purchase into your mortgage balance, however unless you’re going to keep your float for the duration of the mortgage (ie: 25 years) or make instalments based on a 3-5 year loan term, it could end up costing you more in interest that you thought.
On a $300,000 mortgage balance, borrowing $30,000 for a horse float and placing it into the mortgage balance with an interest rate of 3.99% could end up costing approximately $17,457 more in interest over 30 years.
A $30,000 secured horse float loan with an interest rate of 7.99% the total interest could be approximately $6,489 over 5 years.
It pays to compare loans and lenders so as to achieve an answer that’s suitable to you and also to look outside of the square when it comes to borrowing against lifestyle goods.
*Finance subject to approval, including the application of applicable lending criteria. Terms and Conditions apply. Fees and Charges are payable.
Credit assistance provided by iCREDIT Australian credit licence 421829. ^Comparison rate for Secured Loan is calculated on a loan amount of $30,000 secured over a term of 5 years based on monthly repayments. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. **. Interest Rate: 7.99% Comparison Rate: 9.34%
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