6 Things You Should Know About RV Loans

Agent man presentation and consulting car insurance detail to customer and waiting for his reply to finish.

So, you’ve decided to buy an RV, but now what? With recreational vehicles ranging in price from $10,000 to over $1 million, many people will turn to an RV loan to fund their purchase. With so many different products and services available, how do you select the one that is right for you? It’s essential to do your homework, know the facts, and then make the best decision for you and your family. Here are six things you should know about RV loans.

There Are Many Options Available

Unlike an auto loan, which is generally pretty standard, there are many financing options available when it comes to an RV purchase. The most common types are secured loans. This means the vehicle itself will serve as collateral, much the same way that most auto loans work. If you fail to make payments on your loan, then the bank will repossess the vehicle.

Some banks will even provide an unsecured loan to finance your purchase. These types of loans are considered personal loans with no collateral. These are typically harder to obtain, and they come with higher interest rates.

Another critical item to consider is the term length. Most banks will allow a loan term of anywhere from 5 to 20 years for an RV loan. Of course, this is dependent on the value of the RV, the age of the RV, if it is a new or used RV, the loan amount, and your creditworthiness. Just know that in most cases, the longer the term length, the more money you will pay in interest over the life of the loan.

Credit score report with calculator, glasses and pencil on table.

Your Credit Score Matters

We all know that credit scores are critical when it comes to getting approved for a loan. This is even truer when it comes to securing a loan for an RV. Most financial institutions place more stringent approval criteria on loans for recreational vehicles than they do for auto loans.

An RV is considered a non-essential luxury item. Therefore, the bank sees this as an item that you “want” to purchase instead of as a necessity. For this reason, their risk is higher on these types of loans, and that higher risk is reflected in their rates and terms.

Given the increased scrutiny during the approval process, you want to make sure that your credit score is in the excellent range. Not only will this help you get approved, but it will also save you some money on interest. Be sure to use one of the free tools available today to know your credit score before you begin the process of buying an RV.

Shop Around

Just like you should always shop around for the best deal on the RV itself, you should also shop around for the best financing options. RV loans are available from banks, credit unions, and online lenders. Checking the terms and annual percentage rate available at different lenders is an excellent way to save money. Most dealers can send your application to many lenders at once to find the best deal available.

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hand putting money into a down payment jar for RV loan

Save for a Down Payment

Simply put, the bigger your down payment, the more likely you are to be approved for your loan and pay a lower interest rate. The typical down payment is around 20% of the purchase price, although other options exist. You can find some loans with down payment requirements as low as 5%, and even zero down payment in some cases.

It is important to remember that your RV will depreciate quite a bit after the purchase. If you choose only to make a small down payment, you could quickly end up owing more than the vehicle is worth. This could prevent you from selling or trading in the future should you decide you need to make changes.

Consider Gap Coverage Insurance

Particularly if you only made a small down payment, you should consider the optional gap coverage insurance for your loan. This protects you if your RV is totaled, and you owe more than it is worth. Let’s look at how this works.

Say your RV is totaled in an accident, and you owe $25,000 on your loan. However, the current value of your RV is only $18,000. That leaves a difference of $7,000 between your loan balance and what your insurance company will pay. Gap coverage insurance will take care of this difference for you so that you don’t have to worry about how to pay the difference. In most cases, it is inexpensive, and you can even roll the amount of the gap policy into your monthly payments.

Empty money in wallet because of large rv loan

Don’t Get in Too Deep

Just because you can get approved for the loan doesn’t mean you can afford it. You need to remember that your loan payment is not the only expense you will have. Consider things like fuel, insurance, license plates, and other items. These are additional expenses that you will incur as a result of owning a recreational vehicle.

Also, going camping can get expensive. You’ll need to pay for your campsite rental, meals, and other campsite essentials that you like to have. Be sure that you factor in all these additional expenses before deciding whether or not you can afford a specific RV. There is more to it than your monthly loan payment!

Conclusion

Make sure you do your homework and find the best options available for your situation. You want your purchase to be a fun and happy occasion, not a decision that you will regret in the future. Following this advice should allow you to be prepared to buy your first or next RV and finance it with confidence. Good luck and happy RV’ing!

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5 comments
  1. love the page ,helps with the long Upper Peninsula winters .250 plus inches this year.If you ever get back to Michigan check out the Houghton area.

  2. We’re looking to buy a new Class B+. It will take between 8-12 months for manufacturing and delivery. The dealer requires a $10k down-payment to start the manufacturing process. We have those funds available. We will need to take out a loan for a significant portion of the $150,000 rv. Would we take out that loan closer to the delivery of the rv or would a lender require us to take the loan at the time of placing our order? The former option would allow us to save up a more significant down-payment/first payment – perhaps close to 35-40% of the cost and improve our good credit score a bit more.

    1. Hey Susan, I would imagine that you would complete some financial paperwork for approval when ordering it but normally the loan is not signed until delivery.

  3. I didn’t realize that having a good credit score can help you make your interest more affordable when getting a loan for your RV. My wife and I are interested in buying an RV so that we can take our son camping this month, but we’re worried that we may not be able to afford one since my job is our only source of income. Maybe we should find a lender that can help us finance our RV.

  4. Thank you for explaining that most financial institutions pay more attention to your credit score when you try to get a loan for an RV. I really want to get an RV for Summer vacations. I’ll talk to my wife about boosting our credit score a little bit now so that we can get a loan for an RV.

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