Purchasing a caravan can be an exciting experience as you consider the wide selection of makes available in Australia and deliberate over the different models to decide which will exactly meet your travel and holiday plans. You may also have the manufacturer’s options and accessories to think about including. Plus you’ll no doubt have a heap of questions to ask the dealer about the specifics of the model you’ve chosen.
The same process applies when taking on finance to purchase your caravan. This may be the first time you’ve applied for finance for leisure and recreational goods and you’ll no doubt want all your queries addressed so you know exactly what you are committing to.
While we’ve provided extensive sections on frequently asked questions, there are a number of typical questions that our consultants receive that warrant more in-depth coverage. Specifically in regard to making extra payments on the loan and what fees apply when you pay out the caravan financing early.
Making Extra Caravan Finance Payments: Personal Loans
When arranging caravan finance, our loans have fixed elements including fixed repayments. These are based on equal amounts due each month over the fixed loan term. So if you have some extra money at some stage, should you and can you make extra payments on your loan and if you do, what are the outcomes?
With both Secured Caravan Loans and Unsecured Personal Loans, extra payments are permitted. If planning to make extra payments, borrowers should contact their lenders to advise them of their intentions.
In making extra payments in addition to the scheduled monthly loan repayments, you should be aware of a number of details:
- Payments made in addition to the loan repayments cannot be later withdrawn.
- Extra payments can be used against future monthly loan repayments.
Making extra payments and still adhering to the monthly repayment schedule results in several outcomes:
- Interest on consumer loans is calculated on a daily rate and then charged to the loan on a monthly basis. So immediately, a benefit is realised through saving on the total interest you will pay over the life of the loan.
- Consumer loans are regulated under the law and all interest outstanding is rebated back to the borrower.
- By making additional payments while adhering to the agreed monthly loan repayment schedule, the loan will be paid out that is finalised before the fixed loan term.
- Finalising a personal caravan finance contract before the scheduled end of the finance term can attract penalties which are known as break fees. We have covered the detail on break fees below.
If you’re in line for a tax refund this year from the LMITO or the tax cuts introduced in the October Federal Budget, using those funds to reduce your caravan loan may be in your thoughts.
Making Extra Caravan Finance Payments: Business Loans
While caravans are generally associated with holidays and private travel, there are many businesses that can require caravans, mobile homes and other types of RVs for use in their operations. These include holiday and caravan park operators, mining operators, construction workers, research and exploration organisations and providers of temporary housing.
For businesses acquiring caravans as a business asset, Caravan Chattel Mortgage is a very popular form of finance. While businesses focus on the tax deductions and other benefits associated with their finance, there may be circumstances under which the business chooses to make extra payments on their commercial caravan finance. These may include reducing debt as a way to improve the business balance sheet to take on additional investment commitments.
As commercial finance is not regulated in the same way as consumer finance, it will be at the discretion of the lender what fees will apply to contracts that are finalised prior to the end of the agreed term.
Caravan Finance Break Fees: Personal Loans
Secured loans across the consumer finance sector have similar break fees amounts. Exactly how much the break fees are on individual loans which depend on:
- The amount outstanding on the loan.
- The timing in regard to how many months are left in the loan contract fixed term.
To get an exact amount on break fees, individual borrowers should contact their lender.
As a guide to give you some indication of what your break fees may be, they can range from $600 to $900 per loan, calculated on a pro-rata basis. For example, take a fee of $600 and divide it by the total number of months in the original loan term, then multiply that figure by the number of months still left at the time of paying out the loan.
Personal Loans which have been established at a variable interest rate normally do not attract break fees.
Caravan Finance Break Fees: Business Commercial Finance
While the consumer finance sector is highly regulated as per ASIC rulings, the commercial or business finance and loans area is not regulated. So when it comes to many aspects of a finance contract including fees and penalties for breaking a contract prior to the end of term, the details are up to the discretion of individual lenders.
Break fees on commercial finance can include three main types:
- Set in regard to Rule of 78 which relates to at what point in the finance term the interest is applied. Break fees would reflect how much interest and how much of the principal is outstanding.
- Discount rate charged on the early payout based on the outstanding balance.
- A percentage of the interest rebate. That is a percentage of the interest on the loan which is still owing, charged in the payout to the business customer.
If a business has plans to pay out a loan early or make additional payments, having a conversation with their lender will provide details on costs. The refinancing process would involve paying out a loan early and as such break fees would apply. To receive estimates on repayments, utilise our online caravan finance calculator.
Call 1300 000 003 to discuss a quote or other aspects in regard to caravan lending with our consultant.
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.