Navigating Loan Rate Increases

Indications of Incoming Range Increases

Any boat dealers in business around 2008 remember the struggle with boat sales. The financial disaster led to rapid inflation, which caused the Federal Reserve to raise interest rates in an effort to attack recession. Sound familiar? Our economy still hasn’t recovered from COVID-19, and inflation is at a 40-year high. To combat this, loan rates are increasing this July for boat purchases and other luxury items.

Recent Boat Loan Rate Increases

Boat loan rate increases are at an all-time high, surpassing the mortgage rate for the first time in years. Before 2020, the average interest rate for boat loans was around 2–4.5%. COVID-19 came, and in some cases, provided financial forgiveness through loan freezes and extended repayment periods.

However, this sent ripples through the economy. To compensate, current boat loan interest rates began increasing. As of July 2022, they sit anywhere from 5.76–9.95%, with many analysts expecting this rate to continue growing.

Luckily, you can take a few precautions to prepare your finances for the coming waves.

Tips To Prepare for Loan Rate Increases

Follow the below tips to stay ahead of loan rate increases:

Understand Your Finances

Long before you begin forming a financial action plan, you need to get an idea of your financial standing. Evaluate how much you have in both savings and debt, and use this information to isolate areas that need the most attention.

Having a clear picture of your finances helps you understand where you’re falling short and the paths you can take to get above water.

Improve Your Credit

It’s essential to improve your credit when loan rates are rising. Having a high credit score qualifies you for the lowest available rates, helping you offset the increasing costs. To raise your credit scores:

Pay your bills on time
Monitor credit reports
Clear up errors quickly
Don’t use more than 30% of your credit at once.

Looking for additional tips to improve your credit score?

Take a look at our all-inclusive guide.

Improve Your Credit

Know the Difference Between Good and Bad Debt

Many boat owners are surprised to learn there’s a difference between good and bad debt. Evaluate your terms and conditions to find out which type you have.

Fixed-rate loans are an example of good debt, as your monthly payments stay the same, keeping you safe from loan rates increases.

If you have variable-rate or high-interest debt, your payments could fluctuate with market conditions. Borrows with these loans are hit the hardest, but you can prepare your finances by:

Adjusting your repayment period
Consolidating credit payments
Paying off outstanding debts
Refinancing with an alternate provider

Changing your rate and terms is an effective way to hedge against the effects of inflation.

Shop Around for Alternative Financing

If you bought your boat during high interest rates, and have a good credit score and payment history, you could qualify for refinancing.

Refinancing your boat loan can help alleviate the stress of rising market conditions. Depending on who you financed with, there could be better terms and conditions available.

If you worked with a boat dealer or bank, you’re most likely paying the highest interest rates available. Boat dealers understand the convenience that comes through financing with them and offer high interest rates in return for the easy process. On the other hand, banks often use high interest rates as a way to protect themselves and their loans.

Fortunately, there’s a third option. You can cut out the middleman and work directly with a lender specializing in nautical financing.

Outsourced financing companies are experts at restructuring loans to relieve your financial burden. These lenders offer improved boat loan terms compared to standard providers and are an effective way to prepare for incoming loan rate increases.

Searching for the Lowest Interest Rate? Finance Solution Can Help.

Finance Solution is your top choice for outsourced nautical financing. Our experience, resources, and established connections provide you with the lowest available rates. Our experts work with you, evaluating your financial standing, and finding solutions that work for you.