One of the most extensive personal finance product available today is the leisure loan. This loan is designed to finance any acquisition that is deemed to be for leisure. This usually varies from lender to lender but generally includes boats, bikes, caravan, jet skis, road vehicle, campers, etc. It generally deals with vehicles that are purchased for leisure.
A leisure loan is usually a secured loan where the lender holds an asset that belongs to you, which could be the leisure vehicle itself as security against the default of the loan. While some lenders offer unsecured loans, most prefer the secured one. The reason for this is not farfetched, a secured loan is less risky, and where the borrower defaults, all the lender has to do is take the collateral and sell it to recoup any loss.
In order to secure a leisure loan, the lender usually has criteria that you must meet. Most of these criteria relate to your ability to repay the loan. This means employment and employment stability are essential before anyone can be granted any leisure loan. Creditworthiness is also essential as it will determine the type of loan you will get. This is why you must ensure that your credit score is good. A low credit score may mean you have to pay more in terms of interest, and many more terms may not be as favourable as you want them to be.
When getting a leisure loan, ensure that the lender is licensed by ASIC or is an authorised representative of a licensee. You can confirm the licensing of any lender or credit provider on ASIC Connect professional register. Doing this ensures that you avoid being scammed or duped. It is one of the first things you should confirm even before dealing with the lender.
It is also essential that you read the credit guide before getting into any credit contract with any lender. Every company that is engaging in or providing credit activities or services must the borrower a copy of the credit guide and a credit proposal disclosure document which contains information such as:
- The Australian financial services number of the company
- Charges and fees
- Contact details
- Details informing you of an available external dispute resolution scheme or your right to complain.
Lenders are bound to certain standards too in their job. For instance, they must not enter an unsuitable contract with you. An example of an unsuitable contract is one that does not meet your objectives and requirements or an agreement that would be impossible for you to repay without going through any hardship.
Lenders are also obligated by law to reasonable inquire into financial position, objectives and requirements. And to also do everything reasonable to verify your financial position.
That said, when you are seeking a loan, there are things you should look out for yourself. This include:
- The Interest rate of the loan
- The repayment period
- The monthly instalment payments
- Whether there is an option of prepayment. Etc.