You’re ready to dive into the camping life. Maybe you’ve been saving for a few months to make that down payment. You’ve picked out the perfect RV, and you’re ready to sign the papers. But what are your financing options? How does RV financing work? Should you get a loan through your personal bank or go through a credit union? Do you have to get financing through the dealership? Let’s take a look at all of these questions and more.
What Is an RV Loan?
An RV loan is similar to any other loan. You can get a personal loan or a vehicle loan. Either type of loan will have rates and terms that vary from lender to lender based on your credit score. And yes, there are still ways to secure a loan even with bad credit.
The age of the RV, your income, and whether or not the loan is secured or unsecured will also affect the rates. You might apply for a loan at the dealership through their financing department or secure a loan on your own through a bank, credit union, or online lender.
Not all lenders offer RV loans, however, so you’ll have to do your research. Also, if your RV will be your full-time residence, you’ll be more limited with lending options as not all lenders will give loans for this purpose.
How Does RV Financing Work?
Just like most people apply for a loan when purchasing a house or car, you’ll apply for a loan to purchase an RV. Usually, you do this through a dealership, but if you’re purchasing through a private party, you’ll have to secure the loan on your own through an online lender, bank, or credit union. Most credit card companies don’t offer loans in the amount you’ll need to purchase an RV. However, this could be another option if you’re putting a large payment down upfront and just need to cover a few thousand dollars with a credit card.
Different lenders offer different rates and loan terms, so shop around to find the best deal for your situation. You may want a shorter loan term with lower interest rates. You may not mind having higher interest rates because you need to secure a loan over a longer period. Don’t feel like you have to use the lender the financing department at the dealership has partnered with to finance your RV.
Unless you’re paying cash, RV financing is similar to car financing. Once you’ve chosen the lender, you’ll sign the paperwork agreeing to the loan terms. This includes the rate and length of the loan. RV loans tend to be longer than car loans. Most borrowers need more time to repay the loan. Lenders usually offer 10- or even 20-year options.
Secured Loans Versus Unsecured Loans
One of the big questions people face when asking, “How does RV financing work?” is what a secured versus unsecured loan is. Secured loans require collateral like a house or car. In this case, the collateral is the RV. Banks and credit unions usually offer this option because they don’t want to loan you a large amount of money without having some kind of backup if you don’t make your payments. They can take possession of your RV if you don’t repay the loan.
On the other hand, you don’t have to pledge any assets if you get an unsecured loan. These loans typically have higher interest rates. Borrowers also tend to have higher credit scores. Sometimes there are restrictions on how you can use the loan funds. Make sure you can use the money to purchase an RV.
Both secured and unsecured loans will have varying rates. The length of the loan repayment and terms will also vary. Make sure you know and understand what type of loan you’re getting when purchasing an RV.
What Is the Interest Rate on an RV Loan?
According to Business Insider, “the average RV loan’s interest rate is 6.17% for a new RV purchase and a 36-month loan term and 6.15% for a 60-month loan on a new RV purchase.” Bank of the West offers the lowest interest rate for full-time users, starting at 3.59%. Lightstream is another good option and offers loans for any RV regardless of age.
Interest rates will vary based on your credit score and income. Your neighbor may get a loan with a 4.12% interest rate. When you apply with that same lender, your rate might be 4.85% because your credit score isn’t quite as high.
Do You Need a Down Payment to Get an RV Loan?
You do need to make a down payment to get an RV loan. This is similar to getting a mortgage. A lender won’t pay for the entire purchase. Sometimes lenders require a 10% down payment; other lenders require a 20% down payment. This is why it’s important to shop around and do your research. If you’re getting a personal loan in a smaller amount from a lender, you won’t need to make a down payment. But to qualify for an RV loan, you will need to have some cash.
Is Taking Advantage of RV Financing Worth It?
This is completely dependent on your personal situation. Is your RV your home? Then yes, RV financing is worth it. Are you looking to take out your motorhome six months a year? Then yes, RV financing is worth it. But are you looking for an entry-level travel trailer to go camping a few weekends a year? Then RV financing might not be the best solution for you. There are other options like a personal loan that might be better.
Consider as many options as possible. It might take longer, but it will be worth it. Purchasing an RV is a huge financial investment. But the pay-off can be priceless. The memories you’ll make while camping, even if just a couple of times a year, will last a lifetime. Just make sure to go into your purchase understanding of the loan terms.