How to Know if You Should Refinance An RV Loan
The simple answer to the question, “Can you refinance an RV loan?” is YES! There are many resources available for refinancing an RV including local banks and credit unions. But with almost all binary questions, there are caveats to qualify either answer.
Why refinance an RV?
If your motorhome is currently financed but the lender now offers a better interest rate, or perhaps you now qualify for a longer-term loan, you could ask the lender if they’re willing to refinance your motorhome. There could be a small refinancing fee for this service, but refinancing might significantly reduce your monthly payments and you may be able to wrap the refinance fees into the loan package.
Since your current lender already has all the documentation on your rig and your financial history, it should be a simple yes or no answer to your refinancing question. However, if the current lender is not willing to refinance, you might have success with your local bank or credit union if you already have a good working relationship with these banking professionals.
Many banks limit vehicle financing to six or seven years, which may not be long enough for your needs, but it wouldn’t hurt to ask your bank if they will refinance an RV, and if so, for how long.
If they’re willing, you may need to provide a third-party inspection report to verify the condition of your RV. If the bank doesn’t have their own inspector recommendation, you can always get that done at any Camping World RV Service Center.
Reduce your RV payments
Perhaps to better understand motorhome refinancing, we should examine why people seek refinancing in the first place. For many people who are seeking RV refinance, it might just boil down to a desire or need to lower their overall monthly obligations by reducing their RV payments. That can be accomplished in one of two ways.
First, they could extend the term of the loan.
Second, they might be able to refinance at a lower interest rate.
Either one or both of these options will result in lowering their RV payment, which will in turn lower their overall monthly liabilities.
Consider the scenario that an RV buyer, at the time they purchased the motorhome or RV, could only qualify for a short-term loan because they had negative events in their financial history which lowered their credit score. Perhaps they had some delinquent payments or an old bankruptcy still lingering on their credit report.
These negative financial attributes limited the borrower’s ability to secure long-term financing, but their financial situation had changed, and they knew that over the next few years they would be able to improve their credit report and their credit score, so when they purchased their RV, they accepted a short-term loan and higher payments.
Now, several years later, after establishing a reliable payment history, with the old bankruptcy off their credit report, and with an improved credit score, they can qualify for a long-term refinancing loan with a lower interest rate. Both the longer loan term and the lower interest rate will reduce their monthly payments and their overall monthly obligations, giving them more discretionary funds to use as needed.
Other reasons to refinance
Another reason someone might choose to refinance their motorhome is to recapture cash that is tied up in an RV without actually selling their RV.
If the motorhome was purchased outright, the owner might want to (or need to) recapture some of their money that was invested in the RV. But refinancing an RV is not like taking equity out of a home or a home refinancing deal.
Generally, the value of houses will increase over time, so the liability of an equity loan is offset by the appreciation. Recapturing cash from an RV may put cash back in the owner’s pocket like a home equity loan, but that cash will eventually need to be repaid in full, since the RV will never increase in value.
Sell your RV
The faster method of recapturing part or most of the cash tied up in an RV is simply to sell it, and there are companies like National Vehicle that can help accomplish that with the least amount of delay and aggravation, if the need for cash is immediate. However, taking that drastic step might not be necessary when refinancing the RV simply makes more sense. When the motorhome is refinanced as opposed to selling it, the owner gets to keep using and enjoying their RV and they have access to that capital.
In summary, the two reasons to refinance an RV are to either lower the payments or to recapture cash, and regardless of why someone wants to refinance, there are numerous options to do just that.
Do your own research or use a loan broker
There are many lenders which will refinance a motorhome or RV. But every lender has their own policies. What if your bank won’t refinance your rig? Or you don’t qualify for their lending program? Then you might need to widen your search for the perfect finance option. Prepare to do some digging to find the right resource.
To assist in this search, there are firms that will act as a loan broker. These organizations have broad access to RV financing. After gathering all the pertinent data about you, your RV, and your loan needs, they match you up with the right lenders. This saves time and broadens your search. All the lender’s policies are different. These brokers know which ones will fit your criteria the best.
For example, some lenders are simply not licensed to do business in your state. Or, they will only finance new loans, but will not refinance RVs. Some will refinance, but only for recreational use, not full-timers. Others require a high credit score, or have vehicle age or mileage restrictions that precludes your RV. Some lenders will only finance RVs over or under specific values.
Each lender’s policies are unique, so finding the right lender can be confusing. Therefore, using a loan broker to cut through the confusion will save you time and frustration. The list below will help you identify potential lenders and loan brokers to get you started on the research.
- Southeast Financing– Loans between $15K and $4 million. Minimum credit score of 550. Vehicles newer than 12 years old. No full-timers.
- Mountain America – Loans up to 20 years and over $50K. Mountain America will help you find the best loan for your needs.
- Bank of the West, which is a division of Essex Credit – Refinancing and full-timer loans are available. Credit score of 700. 20-year terms are available for loans over $50K.
- National Vehicle – Primarily a resource to help sell your RV if refinancing doesn’t work out and you need to make a change.
One of the best parts about RVing is engaging with the community of traveling enthusiasts. iRV2 forums allow folks to chat with other RVers online, and get other perspectives on everything RVing, including products, destinations, RV mods, and much more.
Peggy Dent is an author, writer, and full-time RVer, traveling around the US and Canada. She’s traveled more than 130,000 miles in a motorhome, over the past 20 years, and is currently writing for the RV industry. You can contact her through her website at www.APenInYourHand.com