You’ve been dreaming of owning your very own recreational vehicle, and after months of searching, you have found the perfect RV. But you don’t have enough money to purchase it with cash, so you will need RV financing.
It sounds like you may need an RV loan.
What is an RV loan?
Borrowing money to buy a motorhome, travel trailer or 5th wheel can be a little overwhelming if you don’t know what to expect. It is a lot like an auto loan, but there are a few important differences. To explain them and help you through the loan process, we’ve created an exclusive guide to RV financing.
How Does an RV Loan Work?
For those RVs that cost more than the money we have saved in a nest egg, purchasers can apply for a loan. Creditors will require a downpayment and the percentage rate is usually a little higher than an automobile, with shorter terms than a mortgage. Just like a car loan, monthly payments are required until the vehicle is paid off in full.
What are Typical RV Loan Terms?
If the RV you want to purchase is 10 years old or newer, most lending institutions will allow you to put down 10% of the price, and they may offer financing over 5 to 20 years, depending on the price of the vehicle.
If, however, you are considering a unit that is more than 10 years old, you may be required to put 20% down, with the longest financing term being no more than 5 years. The interest rate on your loan will also be higher than one on a newer vehicle.
Types of Loans
There are usually two types of loans that can be used to finance an RV:
- Unsecured Personal Loans (also known as “Signature Loans) – Most banks and credit unions offer unsecured loans, meaning you do not have to have any collateral or a co-signer for the loan. These are very limited in the amount of money lent, however. In most cases, $3,500 to $5,000 is all that is allowed to be borrowed on an unsecured loan, and the interest rate charged on the loan is a bit higher than a typical secured loan. This might be helpful if you have a good deal of money already saved to put toward the vehicle and just need a couple of thousand dollars to make up the difference, or if you are purchasing an older, less expensive RV.
- Secured Vehicle Loan – This type of loan acts like an auto loan, in that you will apply and are usually required to put at least 10% down on the vehicle. The value of the RV that you will be purchasing is usually higher, so the loan is “secured” by the bank holding the title to the vehicle until you finish making all of the payments owed. Many lenders offer longer terms on these loans, spread over 5, 7, 10, or even 20 years, and loans are written in amounts from $10,000 to over $150,000.
How to Finance an RV in 6 Steps
- Set a budget – Know how much you want to spend, even before you pick the perfect RV model and floor plan.
- Save a down payment – Remember that you will have to put some money down on your RV. If you want to buy an older RV, plan on saving at least 20% of the purchase price as a downpayment. For RVs that are 10 years or newer in age, save at least 10% of the purchase price.
- Check your credit score – Start working on your credit rating even before you begin the shopping process. Make sure all payments on your bills and credit cards are on time and try to pay down as much of your debt as possible before applying for an RV loan. A higher credit rating can translate to lower percentage rates on the loan, which can save you a lot of money over the course of that loan.
- Decide which type of loan you want – If you don’t need more than $5,000 to buy your RV, consider a signature or unsecured loan. But if borrowing $5,000 or more, you will most likely be required to apply for a secured loan.
- Compare different lenders – Loan rates can vary greatly with different lenders. Many times credit unions will offer the most competitive rates, so open up a checking or savings account with a local credit union to establish a relationship several months before applying for a loan there.
- Negotiate – Don’t be afraid to offer a little less on the purchase price, whether shopping at a dealership or from a private individual. Many times sellers have built in a little “wiggle room” in their pricing.
How to Qualify for the Best RV Loan Rates
If you had problems with credit in the past, there is no time like the present to begin improving your credit score. Aim to raise it to at least 725 to get better rates and possibly even prequalify for financing before you start shopping. And pay down any debt you have accrued, which will also help your credit score.
Loan institutions will also gain access to your bank records when you apply, so start socking away some cash in your savings account to show them you are a dependable breadwinner with a stable income.
Where to Get an RV Loan
- Online Lenders – Lending Tree and Good Sam handle RV loans via the internet, as they don’t have storefronts.
- RV Dealers – Most RV dealerships will offer to finance in-house or through a local bank that they work with. When we purchased our RV, we were able to get a better rate from the dealer financing than any other place we checked.
- Banks – Check with your own bank or some that specialize in RV loans, like Suntrust Lightstream and Bank of the West.
- Credit Unions – Open an account at a local credit union in advance, then apply for an RV loan with them.
Purchasing the RV that is perfect for you may take some time and effort, but putting the work in to improve your credit rating, save for a downpayment, and select the best lender will prove to be invaluable. The money you save can be used to enhance your camping experience for years to come.
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