If an RV is something you want to own, you first need to figure out financing. RV loans are available in the same way auto loans are through credit unions, banks, and other online lenders. RVs on average can cost between $10,000 and $1 million.
An RV loan provides long-term financing allowing you to make payments towards these high amounts. Most lenders offer loans for both new and used RVs and in most cases, you can get this information from the dealership. The RV itself serves as collateral so you will not need to put anything else upfront to secure your loan. Every lender is different but on average, loan repayment terms are between 1 and 15 years, with some lenders allowing for up to 20 years.
How Does An RV Loan Work?
An RV loan works in the same way as any other consumer secured loan. A lender will provide the funds for you to purchase an RV and you agree to pay them back within a certain amount of time. These loans are considered secured because the RV serves as collateral. The process begins with you choosing a lender, completing an application and when approved, you sign an agreement that outlines all the terms of the loan.
What Are Typical RV Loan Terms?
The process for an RV loan is similar to that for cars. The main difference is usually the repayment terms. Because RVs are much more expensive than cars, the repayment periods offered are longer. Some lenders will allow for up to 240 months for repayment. If you have the ability to make higher payments each month, you can choose shorter terms. Repaying the loan back quicker means there will be fewer interest payments.
What Are Average Interest Rates For RV Loans?
Interest rates can start around 4.29% with an excellent credit score. Poor credit (FICO score below 580) will come with higher interest rates. When this is the case, it is often recommended to save for a larger down payment, to reduce the financed amount. This also gives you time to improve your credit score.
6 Steps To Finance An RV
1. Set A Budget: Getting an RV is a big purchase, and a budget will help you when it comes to shopping. You can get towable pop-up campers for around $5000 and high-end RVs can be over $1 million. Figure out what you can afford before you buy.
What size RV do you need? Smaller campers will be cheaper and easier to drive and park, but may not be big enough for your needs or family. You also want to consider what your travel plans will be so you can include recurring costs into the budget. This includes maintenance, fuel, insurance, and storage.
When it comes to repayment terms, choose what works realistically with your budget. You need to be comfortable with monthly payments before you sign. A ten-year loan will have higher monthly payments but can be paid off faster whereas a 20-year loan will have more affordable payments each month.
2. Down Payment: A typical down payment is around 10% of the purchase price. Some lenders prefer closer to 20%. The more money you put down, the lower your monthly payments will be. Be cautious of hidden fees and interest rates when deciding on the down payment. You want to make sure you can pay off the loan in a timely manner.
3. Credit Score: To get lower interest rates, you will need a high credit score. The best rates come with scores in the mid-700s and higher. Check your credit score before purchasing. You can also add a co-signer to help get lower rates. Credit scores can be checked with Experian, TransUnion, and Equifax. If you need to take time to rebuild your credit, that will go a long way in securing a better interest rate for your RV loan.
4. Type of Loan: You can choose between secured and unsecured loans. Secured loans have lower interest rates and may be easier to get with lower credit scores. with unsecured loans or fast lending, there is no risk of losing the RV if you fall behind on payments.
5. Compare Lenders: You should always compare different lenders before making a decision on a loan. RV loans can be obtained from banks, credit unions, and online finance companies. By taking time to research and compare, you can save money over the life of the loan. Some lenders will have a minimum amount for a loan and others may restrict the type of RV loan you get. Doing some research first will get you to the best decision.
6. Negotiate: Be prepared to negotiate pricing and terms for an RV loan, just as you would with a car. Negotiating can save you money and can even get you better loan terms. Ask for the price you want on your RV and research pricing at other dealerships ahead of time,
How To Qualify for the Best RV Loan Rates?
Chances are the rates for an RV loan will be higher than those for cars. This is because RVs are considered to be luxury vehicles which makes lenders more cautious. It is also why the RV usually has to serve as collateral for the loan.
Checking your credit score before approaching a lender is the first step. You also want to look at your income-to-debt ratio, as this is what lenders will use to evaluate your risk. You also want to make sure you have a good credit history, on-time payment history, and a variety of credit accounts.
5 Reasons To Not Finance Your RV
1. Your RV is not an investment. It will not retain value over time and is a depreciating asset. A new RV can lose close to 30% off its original price within the first year.
2. It is more difficult to finance an RV. By the time you look into an RV loan, you will likely already have other loans of other items. Lenders will look at this debt-to-income ratio to evaluate the risk. If your income is already lower than the debt you have, an RV loan with interest can be too much. If this is the case, it is better to save money rather than take on additional debt.
3. RV loans have higher interest rates. The rates are similar as with car loans but with RV loans, the rate increases significantly when you have a lower credit score.
4. Repossession on RVs is common. If you are unable to make payments on an RV loan, it can be repossessed by the lender. The lender is rarely able to sell the RV for the original loan amount, so your loan will go to collections. If you used any collateral for the loan, like your home, a lien can be put on the property. You can also be taken to court for collection of the balance on the loan.
5. You never really own items that you are financing. The lender still owns your RV. You are also making payments on an RV that you never got to test first. It is always a good idea to try RVs through rental companies before you decide to buy.
If you are unsure about financing an RV, renting an RV before you buy one can help you decide. Once you decide, research lenders and insurance and then you can work on negotiating the terms for your loan.