You might be shopping for a recreational vehicle, or RV for short if you want to move your house on the road. You might be wondering how to get an RV loan because the most expensive or high-end models can cost up to $1 million. RV prices range from hundreds of thousands of dollars to this amount.
Getting an RV financed is similar to getting an auto loan, but to keep your payments lower, lenders frequently offer longer loan terms. Particularly for pricey motorhomes, the qualification process for RV loans may also resemble that of obtaining a mortgage rather than purchasing a car.
But if you only use a camper for occasional warm-weather weekend trips, you might not even need an RV loan.
1. Learn how RV loans work
An RV loan may function similarly to a mortgage or auto loan, depending on the amount of money you require. Similar to a car loan, your eligibility for a smaller loan amount of $50,000 or less will mostly depend on your income, credit score, and the age, mileage, make, and model of the RV you’re purchasing. You make a fixed payment for a predetermined amount of time and receive all of your money at once.
Lenders examine your finances more closely for larger loan amounts of $1 million or more, much like they do for mortgages. We examine your total debt, credit score, and income. To grant you a loan, the lender might also look more closely at the RV’s specifications, ownership history, and general condition.
Since most RV loans are secured by your vehicle, the bank may be able to take your camper away from you if you are unable to make your payments. If you wish to purchase your RV entirely, think about taking out a personal loan. Since most personal loans don’t require collateral, in the unlikely event that you are unable to repay the loan, you won’t have to give up your RV. Rates might be greater than secured RV loans, though.
2. Know how much RVs cost
Choosing between a new and used RV is the largest financial decision you will have to make. A 20-year-old towable pop-up trailer might set you back about $5,000, but a brand-new Class A motorhome with all the bells and whistles could set you back over $1 million.
Recall that, similar to cars, recreational vehicles have the potential to lose value once you purchase a new one. The value of a used trailer won’t decrease over time, but more maintenance and repairs might be necessary depending on how old and well-kept it is. Read the fine print on any loan offers you receive because you might be charged a higher rate depending on the state of a used RV.
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RV dealerships can mark up items by up to 35%, so there is an opportunity for bargaining over the sticker price. If you have your heart set on a new RV, find out what they’re selling for in your area using an RV finder or the Kelley Blue Book RV pricing guide. If the dealership won’t negotiate, don’t be afraid to leave.
RV cost by vehicle type
|$50,000 to $300,000
|$30,000 to $175,000
|$70,000 to $150,000
|$40,000 to $115,000
|$50,000 to $150,000
|$30,000 to $75,000
|$20,000 to $75,000
|$10,000 to $50,000
|$35,000 to $125,000
|$30,000 to $100,000
3. Set a monthly payment budget
See how much your payment will be by using a loan calculator. Incorporate continuous expenses for insurance, upkeep, travel, and fuel into your calculations. Remember to factor in additional expenses for things like lot leasing, campground fees, licenses, taxes, and registration.
The term, interest rate, and loan amount of your RV loan are the three variables that will directly impact your monthly payment.
- Loan term. RV loan repayment terms may be as long as 240 months, but there’s a catch: Longer terms are only available for higher loan amounts (over $50,000 in many cases).
- Loan amount. You may find lenders that offer RV loan amounts as low as $10,000 and as high as $2 million. The more you borrow the higher your monthly payment will be.
- Interest rate. RV loan rates range between 7.24% and 19.95% and are impacted by your credit scores, loan amount, and loan term.
4. Check your credit
The approval of your loan and the amount of your RV loan interest rate may depend on your credit score. Your borrowing capacity may be restricted by lenders if your credit score is less than 680. Additionally, those with excellent credit typically get the best rates on RV loans.
Even with credit scores as low as 550, some lenders will still grant loans to borrowers, but the interest rate and monthly payment will be significantly higher. Furthermore, you might not be able to borrow the whole amount required to finance the RV, depending on your income.
5. Save for a down payment
To be eligible for an RV loan, many RV companies require a down payment of at least 10 to 20 percent of the purchase price. In addition to keeping your payment lower, a bigger down payment could even help you get a better interest rate.
Currently, the average interest rate on an RV loan for a borrower with excellent credit ranges from 8% to 20%, depending on a number of factors including your credit profile.
6. Decide if you need an RV loan or a personal loan
Think about whether you would prefer an unsecured personal loan or a secured RV loan. Both have advantages, but the choice might depend on your preferences as a camper.
When an RV loan makes sense
If you travel in your RV year-round or for pleasure only, as a full-time camper, you will likely require an RV loan in order to maintain a reasonable monthly payment on motorhomes that are as expensive as conventional homes. RV lenders provide loans up to $2 million with terms as long as 20 years.
However, if an RV lender is dissatisfied with the age or condition of a used RV, they may refuse a loan. In that scenario, a personal loan might be a better option for you because you can use the money for anything.
When you should use a personal loan to finance an RV
If you’re like the majority of RV owners, you most likely fall into the category of “casual campers,” according to the RV Industry Association, which means you only go camping for a few weekends a year. Conventional travel trailers are preferred by nearly half of casual campers; they typically cost $24,000.
An unsecured personal loan might be a better option for funding in that situation. Personal loans could enable you to travel in your RV more quickly and affordably than RV loan options. They have terms ranging from two to seven years and quick approval processes. Also, in the event that you miss payments, you won’t run the risk of having your RV repossessed.
To determine how much you can afford for a personal loan, you can use the Bankrate personal loan calculator.
7. Compare RV loan or personal loan rates at several lenders
Get at least three quotes for your RV loan and evaluate the rates, costs, and terms before deciding between an RV loan and a personal loan. You have many options when it comes to financing an RV: banks, credit unions, online lenders, and RV dealerships are common providers of these services.
To avoid any surprises at the closing table, make sure you are aware of the down payment requirements for various RV loan options. Find out from RV lenders how long the process will take and when you can expect the money.
Examine origination fees and penalties associated with early balance repayment on personal loan offers. Examine online comparison sites, your neighborhood bank, and credit union to see what you might be eligible for.