The majority of Australian banks and lenders view jet ski loans as recreational vehicle loans. While policies and some views may vary according to the lender, the general principle is that these loans are treated as luxury purchases.
This can have a measurable impact on the loan. It is important for you to know this before you purchase a jet ski so that you are not caught off guard when applying for financing. Let’s review some of the ways that Australian lenders view jet ski loans and why.
The Loan Purpose is a Factor
As mentioned, most banks categorise jet ski loans as recreational or personal loans. Since jet skis are considered luxury items used for recreational purposes, unlike essential vehicles like cars, the loan terms and conditions may differ somewhat from those of standard vehicles.
However, there are instances where a jet ski loan might be viewed differently. For example, a jet ski might be used as a business vehicle for tourist operators, whereby the jet ski is used to entertain tourists for a living. Another example might be where a jet ski is a necessary means of transport for water rescue workers.
These kinds of cases need to be carefully laid out when applying for a loan so that lenders can approach them differently and categorise them accordingly, which can have a material impact on the cost of the loan.
The Loan Amount Might Be Limited
As with other recreational loans, jet ski loans might be limited depending on the borrower’s financial circumstances. The value of the jet ski itself will also have an impact on the amount of money that you are able to borrow from the bank. Naturally, the lower the cost of the vehicle and the better your lending circumstances, the more preferable the loan will be, with better lending rates.
Typically, a bank will be happy to finance up to about 90% of the purchase price, depending on certain eligibility criteria. This means that there is usually a portion that comes out of your own pocket, which should be funded through a down payment deposit upfront. This will help reduce the overall cost of the vehicle.
The Interest Rates are Higher
Generally, because they are considered recreational vehicles, the interest rate associated with jet ski loans is usually higher than for normal vehicles. Depending on your creditworthiness and the lender in question, you could be offered either fixed or variable interest rate options, each with its pros and cons.
Additionally, many lenders are hesitant to lend money because of the risk associated with high-octane sports equipment like jet skis. Interest rates will typically be higher because there is a greater chance that the vehicle will be damaged and, should you default, the lender might not be able to recover its costs.
The Loan Terms are Shorter
Jet ski loan terms tend to be shorter than terms for car loans. Whereas car loans typically run for at least seven years, a jet ski loan is seldom more than five years long, as jet skis deteriorate more quickly than cars due to the nature of the vehicle and the way it is used.
Since jet skis depreciate and deteriorate much more quickly, it is in the lender’s interest to try and secure the repayment of the loan as soon as possible. Shorter loan terms will generally lead to higher instalments, so you should budget accordingly.
Contact us at iCREDIT today for more information on jet ski loans and for assistance in securing and comparing the best options.