If you are deciding on buying a new float, you should know how horse float finance interest rates work. Here are a few hints and tips on how horse float loans work so that you have the best chance of achieving a suitable interest rate and loan package.
What is Lending?
Finance, Loans, Lending, Credit, however you put it, it’s when a borrower takes out a loan to purchase goods which allow you to repay the loan back at set repayments over a period of time.
In order for lenders to loan the money, they are going to charge interest on the amount of money borrowed. Interest is a sum the borrower will be paying back to the lender for providing the funds.
For example: If you borrow $20,000 to purchase a horse float at an interest rate of 7.99%, with a comparison rate of 9.26%, over 5 years, you could end up paying up to $4,325.00 in interest over the entire loan term.
How are Horse Float Finance Interest Rates Calculated
Unlike cars, horse floats are considered lifestyle or want products and are generally customised to suit the individual’s needs, so most lenders will assess horse float loans differently.
Lending is all about how much risk there is for the lender, so if a borrower defaults on their repayments, the lender needs to consider what they can recover from the sale of a horse float. Generally banks prefer to offer unsecured loans as an easy way of lending, however the downside to this is the interest rates can be significantly higher.
Knowing how horse float loan interest rates are calculated can be essential when deciding on a suitable loan and most banks use score cards which allows them to determine whether or not to provide a loan.
Factors that will influence the final interest rate are:
- Your Credit history. The biggest factor in determining whether a lender is prepared to lend is the borrower’s credit history. Lenders will look at the amount of times the borrower has applied for credit, address history, employment history and credit / default history. This information will provide them with an overall credit score that will show how likely you are to repay the loan.
- Types of interest rates. Variable vs Fixed. The two types of interest rates used are variable interest and fixed interest. The variable interest rate fluctuates over time accordingly to the base rate set by the Reserve Bank. The advantage of variable rates are that if the interest rate lowers, so do the repayments. A Fixed Interest Rate is where the interest rate is fixed for the term. This allows the borrower to accurately predict their repayments and budget accordingly.
- Income vs Expenses. Banks use a ratio to determine how much of the borrower’s monthly income goes towards paying other debts such as rent / mortgage, living costs and loans / credit cards. They need to determine the borrowers capacity to repay the loan comfortably so will look at the surplus or left over monthly income after expenses.
In order to calculate the interest rate you will pay on a horse float, you need to know the loan amount, your credit score, any deposit paid, and your debt to income ratio. To work out whether repayments will be suitable, use the horse float loan calculator.
When shopping for a new or used float, you need to find out the average lifestyle loan interest rate paid by other buyers to determine if you’re being offered a good deal or not. The final rate offered by the lenders depends on your monthly income and your credit score as well as other factors such as the amount borrowed and the age of the float. The higher your credit score is, the lower the interest rate you’ll receive and on the other side, the lower your credit score is, the higher interest rate can be offered.
Choosing a fixed rate secured horse float loan has advantages. The main benefit being you can lock in a low interest for the entire loan term which could potentially save you money should the interest rates rise, however each lender will have their own terms and conditions associated with the loan. You also need to consider that low rate loans, coupled with high monthly fees or insurances will counteract themselves, meaning you could end up paying more for the loan than first anticipated.
You need to read and understand the lenders guidelines to make an educated decision or discuss your loan details with a finance professional so as to avoid paying unnecessary fees and charges over the loan term.
Getting the Loan of your choice
You need to consider comparing loans to make sure it’s suitable to your lifestyle and budget requirements. Many people concentrate on getting the lowest rate but fail to look at any insurances that are included, establishment fees or monthly charges. These factors will influence the amount of interest you repay to the lender.
Other options to consider:
- Length of the loan. The length of time you have to pay off your float loan can be anywhere between 12 and 84 months.
- Minimum Loan Amount. Some lenders have minimum loan amounts you can borrow and may adjust the interest rate for the specific amount.
To help you find a suitable horse float loan, it’s advisable to talk to an industry professional who can provide information on the range of loan products and rates available.