Financing an RV
Table of Contents
- What is an RV Loan?
- How RV Loans Work
- Unsecured RV Loans vs. Secured RV Loans
- Where Can You Get an RV Loan?
- How long are RV loans?
- RV Financing Tips
- How to Get an RV loan
- Additional and Miscellaneous Options
- How to Get an RV loan with Bad Credit
- How to Finance an Older RV
- Frequently Asked Questions About Financing an RV
Do you dream of hitting the open road in an RV but think you can't afford it? Financing an RV is not as difficult as you might think. In fact, many different options are available to help make your dream a reality.
This complete guide will take a look at everything you need to know about financing an RV in the United States. We'll discuss the different financing options available and how to qualify for an RV loan. We'll also provide tips on getting the best possible deal on your RV loan. So, if you're ready to learn more about financing an RV, let's get started!
What is an RV Loan?
First things first, let's talk about what an RV loan is. An RV loan is a specific type of loan used to finance the purchase of a recreational vehicle (RV). RVs can include travel trailers, all classes of motorhomes, fifth wheels, and more. According to the Recreation Vehicle Industry Association (RVIA), the official definition of an RV is "a vehicle which provides temporary living quarters for recreational, camping or travel use."
RV Financing Terms
Before we get into the specifics, here are some terms you should understand when reading about RV loans:
Loan amount- The total amount of money you're borrowing from the lender.
Interest rate- The percentage of the loan amount you'll be charged in interest.
Loan term- The length of time you have to repay the loan.
Monthly payment- The amount of money you'll need to pay each month to repay your loan. Your loan amount, interest rate, and loan term will determine your monthly payment.
How RV Loans Work
The process for getting an RV loan is straightforward. Essentially, you'll need to apply for a loan from a lender, and if you're approved, the lender will give you the funds to purchase your RV. You'll then make monthly payments on your loan until it's paid off. We'll discuss the specific steps later in this guide.
For now, remember that you need a lender that offers RV loans to finance your purchase. Note that if you're buying a used RV or a fixer-upper for under $10,000, you might be able to finance it with a personal loan instead of an RV loan.
Are RV Loans the Same as Car Loans?
Since RVs have the word 'vehicle' in the name, most people think they work like auto loans. And while there are some similarities, there are also some key differences that you should be aware of.
Just like there are used and new car loans, there are also used and new RV loans. They work like car loans because you'll need to make monthly payments to repay the loan over a set period. The interest rate will also be determined based on your credit history.
One difference between car loans and RV loans is the loan term. Car loans typically have terms of 4-7 years, while RV loans can have terms as long as 15 years. When you think about it, an RV is halfway between a home and a car—so it only makes sense that the loan terms would also be somewhere in the middle.
Unsecured RV Loans vs. Secured RV Loans
It's essential to understand the difference between secured and unsecured RV loans before you apply for financing. It might make the difference between getting approved for a loan and being denied.
Unsecured RV Loans
An unsecured RV loan is a loan that isn't backed by any collateral. In other words, if you default on the loan (i.e., you stop making payments), the lender can't come after your RV. They can, however, take legal action against you to try to collect the money you owe them.
Secured RV Loans
On the other hand, a secured RV loan is a loan that's backed by collateral—usually, the RV itself. So, if you default on the loan, the lender can repossess your RV and sell it to recoup its losses. You could also use another asset, such as a boat or a car, as collateral for your RV loan.
Pros and Cons of Secured and Unsecured RV loans
Secured loans usually have lower interest rates than unsecured loans because they're less risky for lenders. That means you'll save money on interest over the life of the loan. They also tend to have longer terms, so you can take your time repaying the loan. A secured loan might be the only option for those with bad or nonexistent credit.
However, the secured loan typically requires a down payment, making it more challenging. And if you default on the loan, you could lose your RV (or whatever asset you put up as collateral). That's why it's essential to make sure you can afford the monthly payments before you apply for a secured loan.
Unsecured loans are entirely based on your credit history. That means that if you have bad credit, you might not be able to get an unsecured loan. And even if you can, the interest rate is likely to be sky high. Unsecured loans are also generally shorter than secured loans, so you'll have to repay the loan more quickly.
Unsecured loans might be beneficial in situations where you can't meet the lender's requirements. Maybe they impose a minimum loan amount you don't want, or the RV you want to buy has more miles than their limit. Another reason to choose an unsecured loan is if you plan on selling the RV before you repay the full amount of the loan.
Where Can You Get an RV Loan?
You can get an RV loan from various sources, including your RV dealer, banks, credit unions, and online lenders. It's important to compare offers from multiple lenders to ensure you get the best deal possible. Most RV dealerships also offer to finance, but it's usually best to get a loan from an independent lender.
Banks and credit unions are traditional sources of financing, and they might be a good option if you have good credit. They typically have lower interest rates than online lenders. Southeast Financial is one example of a company that offers loans for RVs, boats, and other vehicles. They offer both secured and unsecured loans, and you can apply for a loan online.
How long are RV loans?
The length of your RV loan will depend on your loan type and whether the RV is new or used. The specific institution you get the loan from may also impact the length of time you have to repay your loan.
If you get a secured loan, you may have the option of choosing a more extended repayment period. Generally, new RV loans have terms of 10 to 15 years, while used RV loans have terms of 5 to 12 years.
RV Financing Tips
By now, you must be feeling pretty good about your prospects for financing. But before you start shopping for your dream RV, you should keep a few things in mind. Here are some tips to help you navigate the world of RV financing:
Zero Down RV Financing
Don't let the idea of a down payment stop you from getting an RV loan. There are plenty of lenders who offer zero-down financing for an RV. RVs are travel vehicles, so there will undoubtedly be expenses that come with them. It's better to spend that down payment money on things like RV accessories, gas, and activities!
Of course, lenders that offer this typically require excellent credit. But if you have good credit, you might be able to get a zero-down loan from a credit union or online lender.
Improve Your Credit Score Before You Apply
Your credit score is one of the most important factors in getting approved for a loan and getting a low-interest rate. So, if your credit score isn't great, take some time to improve it before you apply for an RV loan. You can do this by paying your bills on time, maintaining a good credit history, and using a credit monitoring service.
Ideally, it would be best to have a credit score of at least 680 before applying for an RV loan. But, if your score is lower than that, options are still available.
Get Pre-Approved for an RV Loan
Getting pre-approved for an RV loan can save you a lot of time and hassle when you're ready to buy. It also lets you know how much you can afford to spend on an RV. To get pre-approved, simply fill out an online application with a lender.
Be sure to shop around and compare offers from multiple lenders before you choose one. Also, make sure to read the fine print, so you understand all the terms and conditions of the loan.
Don't Settle for the First Offer
Just because you're approved for an RV loan doesn't mean you have to take it. Shop around and compare offers from multiple lenders before you make a decision. Compare interest rates, monthly payments, and other terms and conditions.
When you do get an offer, negotiate! You might be surprised how much you can save by simply asking. The RV dealer might also offer leeway on the price of the RV if you're financing through them.
Don't Underestimate the Cost of RV ownership
RV ownership comes with a lot of costs, both upfront and ongoing. Before you finance an RV, be sure to factor in the cost of gas, maintenance, and repairs. Also, remember that RVs depreciate quickly, so you'll want to factor that into your budget as well.
How to Get an RV loan
As promised earlier, here's a step-by-step guide on how to get an RV loan.
Step 1: Determine How Much You Can Afford to Spend
Before you start shopping for RVs, knowing how much you can afford to spend is crucial. There are so many variables to consider when financing an RV, from the price of the RV to the cost of gas and maintenance.
Your lifestyle will also play a role in how much you can afford. Are you leaving all your worldly possessions behind to travel the country? Or are you just looking for a weekend getaway vehicle? These factors will help shape how much you can afford to spend. If you have a financial advisor, now's the time to talk to them about your options.
Step 2: Understand How Much You Qualify For
The next step is to get pre-qualified for an RV loan. This will give you a good idea of how much money you can borrow and what kind of interest rate you'll be looking at. To do this, simply fill out an online application with a lender. Consider your credit score and any down payment you might be able to make.
Be sure to compare offers from multiple lenders to get a clearer picture of what's available to you. Also, make sure you understand each loan's terms and conditions before making a decision.
Step 3: Choose the Right RV for you
Shopping for an RV can be overwhelming. There are several types, sizes, and models to choose from. Not to mention, the price range is vast. You must take the time to find the right RV for you and your family.
Think about how you'll be using the RV and what features are most important to you. Do you need a lot of storage space? Are you planning on cooking all your meals in the RV? Will you be traveling with children or another couple? What kind of vehicle will you tow behind your RV? Asking yourself these questions will help you narrow down the search.
Step 4: Secure a Loan
Once you've found a few RVs that fit your needs, it's time to start negotiating. Remember, just because the dealer has a certain price on display doesn't mean you have to pay it. In fact, most of them markup the price with the expectation of haggling. The more you shop around, the better deal you're likely to get. Also, don't be afraid to negotiate the RV's price, interest rate, and loan terms.
If you're taking out a loan from a bank or credit union, try to get pre-approved for the loan before you start negotiating. This will give you more bargaining power and could help you get a lower interest rate.
Step 5: Close the Deal
Once you've negotiated a price and interest rate that you're happy with, it's time to close the deal. This is where all the paperwork is signed, and you officially become an RV owner! Make sure you understand all the terms and conditions of the loan. Read over all the paperwork carefully before you sign anything.
Now is also a good time to get insurance for your RV. You'll want to make sure you're covered in case of any accidents or damages. Your lender will likely require you to have insurance before they release the funds for your loan.
Congratulations! You are now the proud owner of an RV.
Additional and Miscellaneous Options
On top of insurance, there are a few other things you may want to consider when financing an RV. These are options that your dealer may offer or that you can add to your loan.
Roadside assistance:This is a great option to have, especially if you're planning on doing a lot of traveling. Roadside assistance will help you if you have a flat tire, run out of gas, or need to be towed.
Extended warranty:RVs can be a big investment, so you may want to consider getting an extended warranty. This will cover you if anything goes wrong with the RV and you need to make repairs.
Gap insurance:Gap insurance is something you may want to consider if you're financing your RV through a bank or credit union. This type of insurance covers the difference between what you owe on your RV loan and the actual value of the RV if it's totaled in an accident.
Paint and fabric protection:This option will help keep your RV looking new. Paint and fabric protection will help to resist stains and fading. If you're planning on living in your RV full-time, you may consider this option.
Tire and wheel insurance:Tire and wheel insurance covers the cost of repairs or replacement if your tires or wheels are damaged. RVs do a lot of traveling, so this might be a good option to have.
How to Get an RV loan with Bad Credit
Even if you have bad credit, you can still finance an RV. However, you may have to put down a larger down payment or pay a higher interest rate. Secured loans from credit unions are your best bet for getting a loan with bad credit.
If you're having trouble getting approved for an RV loan, you can always try to find a cosigner: A cosigner is someone who agrees to sign the loan with you and is responsible for making payments if you can't. Having a cosigner with good credit can help you get approved for a loan.
No Credit RV Financing
The process for no credit RV financing is similar to financing an RV with bad credit. You'll likely have to put down a larger down payment and pay a higher interest rate. However, it is possible to get approved for a loan if you have no credit history.
If you're self-employed or have a limited credit history, you may want to consider using alternative forms of income to prove your ability to repay the loan. This could include bank statements, tax returns, or proof of assets. In some cases, you may be able to get approved for an RV loan without a credit check. This is called "no-hit" financing.
How to Finance an Older RV
Many lenders refuse to finance older RVs (10-15 years or older). That's because they depreciate in value quickly and can be difficult to repair. However, there are a few lenders who specialize in financing older RVs. You can also try getting a personal loan from a bank or credit union.
RV financing is a great way to make your dream of owning an RV a reality. By planning ahead and doing your research, you can get the best loan for your needs. Be sure to compare interest rates, terms, and fees from different lenders before making a decision. We hope this guide has helped explain everything you need to know about RV financing.
Published Aug 10th, 2022