Interest rates have been prominent in the general news lately due to a range of factors. Primarily, the RBA slashing the cash rate as part of the stimulus monetary policy in 2020 to record lows. A situation which prompted discussion around whether borrowers should go fixed or variable and made lending more affordable. But with inflation surging, the RBA is hiking rates. So what does all these different terms and the changing scenario mean for caravan finance interest rates?
While many people may moan and groan about banks and lenders raising rates, the situation is not completely under their control or their responsibility. There are settings which determine lender rates and there are a number of actions that individuals can do to ensure they are offered the cheapest caravan finance interest rate.
Caravan finance interest rates will vary across the range of banks and non-bank lenders and will also be determined by the credit profile of the loan applicant. With interest rates in general on a rising cycle, it can be helpful for caravan loan applicants to understand how rates are set, where to get to the best caravan loan rate and what they can do themselves to ensure the cheapest rate offer.
We provide a basic overview of the terms and definitions around interest rates, the factors affecting the rate offered and how applicants can do their bit towards achieving the cheapest caravan loan.
Establishing the Cash Rate
The official cash rate is the rate charged by the RBA, the central bank of Australian on overnight lending between banks. The cash rate is established by the RBA and is part of monetary policy which aims to achieve target economic settings for especially inflation and unemployment and then flow on to economic growth.
The RBA Board meets monthly (not in January) to assess the economic conditions at that time, how settings have altered since their last meeting and hence whether or not a change in the cash rate is required.
Following an extended period of historic lows, with inflation now surging, the RBA is undertaking a period of normalising the rate by increasing the cash rate. The increase in May 2022 represented the first time in over 12 years that the cash rate had been increased. Further rises are expected over the rest of 2022.
How Lenders Set Interest Rates
The banks and non-bank lenders use the cash rate as their foundation for setting their rates across their lending areas. The cash rate is the price they have to pay for their borrowings so to speak. They then need to allow for their own business operational costs and other factors.
Risk is a major consideration and lenders will assess the risk factors associated with different industries and market sectors. This is why you will see a variation in the interest rates offered across different lending areas – home loans, car loans, business loans and leisure loans such as caravan finance.
Business finance rates are typically lower than personal loan rates as businesses are perceived as less risky of default than individuals.
Rates vary from lender to lender as the lenders establish their own individual rates. A contributing factor may be their ‘exposure’ to that market or their willingness and enthusiasm to loan on certain goods.
Specialist lenders in certain areas, such as Jade Caravan Finance is in the RV market, can tend to offer better rates in their specific markets. Cheaper interest rate caravan loans can be achieved by considering more lender options. A key advantage provided through Jade.
Fixed and Variable Rates
One confusing issue with interest rates can be around the difference between fixed and variable interest rates. In the home mortgage market, this is particularly relevant but less so in caravan finance.
A key point of difference is that the fixed interest rate finance we secure on Secured Caravan Loans remains at that same rate for the entirety of the loan term. With home loans, a fixed rate might only be secured for a few years.
Variable rates are subject to change as the lender increases or decreases their rates. Unsecured Caravan Loans may be at variable or fixed rates.
Fixed rate caravan finance is seen as the preference by most buyers as it provides the assurance of continuity and consistency in loan repayments.
Personal Impacts on Interest Rates
The rate advertised by lenders will be for loan applicants that have a good credit profile and it will be for new goods. The interest rate offered to individuals will vary depending on the assessment of risk make of their application by the lender.
To ensure the cheapest interest rate is achieved, caravan buyers seeking finance should ensure their credit profile is kept in good order. While making payments on time to avoid default is a key aspect of a good credit profile, having a good personal balance sheet is also important. As is limiting the number of loan applications made for the same loan.
Very few people will realise that in their attempts to find the cheapest caravan loan - making numerous applications, they can actually be causing a negative effect on their credit profile. Lenders report applications to the Credit Reporting Agencies and multiples can be perceived as a negative.
Using a broker-style lender like ourselves can avoid that scenario.
Sourcing Cheapest RV Finance Interest Rates
With many banks and lenders offering RV loans and the many factors to consider, buyers seeking finance can benefit greatly by using our services to achieve the cheapest interest rate RV loan. We have the connections and accreditations with many lenders so we have instant access and knowledge about which lender is offering the cheapest rates at that time. We also have the expertise and bargaining power to negotiate with lenders.
Interest rates can be a complex area and with more RBA rises on the horizon, the topic is sure to continue in the headlines for some time.
Contact Jade Caravan Finance on 1300 000 003 to discuss a better interest rate caravan loan
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.