Owning an RV is the ultimate American dream. But financing an RV is not like financing a regular vehicle. If you are planning to buy an RV and are looking for a complete guide on RV financing with all the details, then you are in the right place. I think the first question that pops on your mind is, who finances RV loans?
Well, the short answer is there are many different options whether it is secured or unsecured loans. RV dealership’s in-house financing companies and online lenders typically provide unsecured or mortgage-free loans. Bank loans, credit union loans provide secured or with-mortgage loans. Your creditworthiness matters in both cases.
But to know more about your options before applying for any type of loan, we suggest you go through the entire post. We will try to precisely inform you of all the necessary information to get your RV loan granted. Let’s dig deep, shall we?
Who Finances RV Loans?
RV Dealers
This is one of the easiest ways to acquire an RV, thus many RV hunters’ first choice. In this way, you can get your loan sanctioned on the spot without any hassle. There are two ways to do it-
- The dealership itself gives you the loan.
- The dealership has some third-party lenders like banks and credit unions which provide the loan proposals. The best option if the dealership is partnered with a credit card union. You can get the benefit of lower rates if you are a member of that credit union.
Pros
- Very easy and hassle-free.
- You can get your RV loan on the spot and at one go.
Cons
- Remember, loan lending is business for them. It’s always a profit for services.
- Your RV dealer can raise the annual percentage rate at any time.
RV Dealers in-house financing
If you can’t get the financing from anywhere else, then this option best suits you. “In-house” financing means that the dealership has a financing company that will lend you a loan if you are buying the RV from them and you have no other option.
Pros
- The only option if you don’t get a loan from anywhere else.
Cons
- These financing companies are unapologetically profit-driven. Their ARPs are always very high.
Online Lenders
You can also take loans from an online lender. This is another easy way to get your funding. You can apply online, get qualified online, and receive your money within days.
Pros
- It’s quick and easy.
- Everything is done online.
- Multiple loan offers for you to consider at one go.
Cons
- No brick and mortar system.
- Your creditworthiness is the main point here.
Banks
You have to visit the bank in person to avail the loan. The concept of pre-qualification is absent here. The bank may or may not be in partnership with the RV dealer.
Pros
- The interest rates are very low compared to in-house dealership companies.
- The interest rates are fixed.
- 24 hours customer service is available.
Cons
- Bank loans are usually secured loans. It means collateral of the bank’s choice will be involved.
- Bank loans require a lengthy time.
- Your creditworthiness has to be strong.
- A lot of paperwork has to be done.
Credit Unions
What are credit unions actually? Well, credit unions are nonprofit organizations. If you are a member of one, you get certain benefits, like low ARPs or fair credits. It’s a reliable alternative to a commercial bank. This is a great option if the loans are supported.
Pros
- Credit unions usually offer fair rates.
- Lower APRs than commercial banks.
- They are not profit-driven, rather welfare-driven.
- They offer better customer services than commercial banks.
Cons
- Their services are limited. You will be very lucky to get one for RV.
- They don’t have up-to-date technology.
- The membership is paid.
Vehicle Loans: Secured vs. Unsecured
So, what are secured and unsecured loans? In secured loans, the loan borrower’s financial assets are taken by the lender if the borrower fails to repay the loan, making it “secure” for the lender.
This mortgage-pledging concept is not present in unsecured loan plans, which makes the lender vulnerable and “unsecured”. Unsecured loans are usually personal loans and the loan is granted by the borrower’s creditworthiness.
Why should you consider unsecured loans while financing your RV?
- The concept of pre-qualification exists in unsecured loan plans, especially for online lenders. You can compare loan rates, go through loan terms without your creditworthiness coming in the way.
- Unsecured loan systems get you funding relatively faster than commercial banks, at the least. You just have to apply online and if you are qualified, then your account will be credited with the loan amount in no time.
- It’s less risky, as it is mortgage free.
Why should you consider secured loans while financing your RV?
- As secured loans are mortgage-based, you are likely to get lower rates than unsecured loan plans.
- You can get bigger loan amounts by this traditional method.
Loan Eligibility Factors
Owner:
Before applying for a loan, check if you are eligible for an RV loan or not. Consider these factors:
Creditworthiness
Loan lenders see up your credit score before sanctioning any loan to you. Creditworthiness is mainly determined by the credit score- which ranges from 300 to 850. You can find your credit score in your credit report which is annually issued by credit bureaus or credit reporting agencies.
Credit Record
Your credit history should be clear to get a loan. Credit history is a record where how much money you have borrowed and how much you have repaid are stated. You have to prove that you have repaid all your other loans timely and meticulously before you are qualified to get a loan.
Debt-to-income Ratio
The debt-to-income ratio denotes the amount of your monthly income (gross) taken up you pay your monthly debts. A high debt-to-income ratio means you are more payable debts than your monthly income, which makes you incapable for an RV loan.
Down Payment
A down payment is an initial payment you do, especially on goods or services purchased by a loan or paid in installments. A down payment statement proves your willingness to invest money on a certain good or service.
Financial Asset or Collateral
For a secured loan, you must pledge collateral; otherwise, you will not get a loan. For an unsecured loan, a list of your financial assets may be required along with your credit report.
Amount of Money You Want to Borrow
If you want to borrow money more than the cost of an RV, you will be rejected for a loan at once.
Amount of Time You Want to Borrow Money
It’s directly related to the amount of money you want to borrow. Usually, time is longer if you want to borrow a huge amount of money.
Vehicle:
New RV or Second-hand RV
Is your RV a brand new one or second hand? A new RV is a less risky investment than a second hand one. A second-hand RV may need maintenance more than a new RV.
Age and Mileage of RV
If it’s a second-hand RV, then how old is it? If the RV is too old, then your qualification of getting an RV loan may be put in jeopardy. If it’s old and has more mileage, then the investment is quite risky.
RV Price
If the RV is expensive but your creditworthiness is low, then it is likely you will be rejected for a loan. Choose an RV that is in balance with your creditworthiness.
Value
The RV’s actual worth is calculated by the lender. Are they overpaid or are they getting a good value for money- is judged by the lender.
Other information
Other information like trade-in information is also considered before you qualify for the loan.
Preparing Yourself for Getting An RV
Total Cost of RV
An RV’s maintenance cost is something to think about before buying one. RV insurance, gas, antifreeze costs, and many more costs are associated with an RV. So think before acquiring one.
Building Your Credit Score
You need to build your credit score first before applying for a loan. It is the most important qualification for a loan.
Should I Rent an RV rather Buying One?
That’s the most vital question you should ask yourself. Do you really need to buy an RV? Or should you take RV rental services? The best question to ask yourself is how much are you planning on using it.
If you are only planning on using it once a year or once every other year, you are probably better off renting one. However, there is nothing like having your own though.
Loan Negotiation Tips
Should You Stress More on Monthly payment?
You should not. Because, a small change in the monthly payment, let’s say a small increase in the monthly payment to harbor some worthwhile benefits for you. Rather you should focus on the overall price and value for money you are getting from the RV. If you get a considerably good total price, then monthly payment should be considered generously.
Go through All Your Options
You should go through all the loan options before heading for one. You should also hunt to find the best RV within your budget. It is unwise to completely rely on the dealer and depend on them to give you the best offer.
Tier Bump
If you have a good credit history which means a low debt-to-income ratio, a good and steady job, and an excellent credit report then you may get the benefit of a tier bump.
When you are talking to the salesman at the dealership, do not forget to ask him about the tier bump, it is used to determine your credit tier. And a good credit tier can give you certain advantages.
Think Before Saying “Yes” to additional facilities
Don’t say “yes” quickly to offers like extended warranty, tire warranty, etc. They can cost you a fortune. Think about RV insurance, fuel, park fees, and winterization fees before buying an RV.
Loan Rates
Loan rates and terms depend on your financial condition. Depending on your income, the APR of an RV loan can reach up to your state’s highest legally permitted limit.
Terms and conditions for RV loans are as per with any loans such as home loans, vehicle loans, etc. The timeline can range from two to twenty years.
Alternatives to RV Loans
The good news is that there are many alternatives to loans. Here are some examples
Vehicle Loan
If your chosen RV costs similar to a vehicle, then you should go for a vehicle loan, rather than an RV loan.
Personal Loans
If your chosen RV is inexpensive, then you can go for personal loans. A few hundred dollars of personal loan is more realistic than an RV loan.
Home Equity Loans
You can also get a home equity loan than an RV loan if you own a house. But keep in mind that if you fail to repay the loan, you may lose your house.
Full-timer Loan
Get a “full-timer” RV loan if you are planning to live on it permanently.
Cash
There is no better plan than this one. If you have the money to buy an RV, why go for a loan? Pay the money and enjoy what you want.
Mistakes to Avoid
Be a Price Haggler
It can be convenient to dismiss the prospect of buying an RV upon seeing it’s cost. You may think the range is far from your reach, but think again, that might not be the case. It happens that, often, dealers markup up to thirty-five percent of the RV’s real price.
So haggle for the price and take it downwards to your budget. Compare the price with other companies before heading towards one particular RV. 1
Research Adequately
You need to research adequately before buying your RV. Get a clear picture of your budget and find an RV according to it. Getting a realistic budget is important both for finding all the features you need in your RV within your chosen budget as well as finding the perfect loan scheme for you.
Inattention to Dealer Promotions
Sometimes in a hurry to get our RV, we forget to research the dealership. Go through your RV dealer’s website and research thoroughly. Dealerships often offer special prices on different occasions such as Christmas, Dealership Company’s anniversary, etc. Avail those offers until it’s valid.
Remember Your Credit Score
It’s crucial not to forget your credit score. It plays a pivotal role in getting a loan. Get your credit reports ready and clear them if there is an anomaly. What is a good credit score? Well, it depends. It’s different for different types of loans. Usually, a score of 700 is okay to get you a loan. You should worry if it’s less than 600.
Not Considering Your RV’s Future Sale Price
The bad thing about RVs is that their value depreciates all of a sudden. We have seen that a brand-new RV’s price dropped suddenly after a year, thanks to the new features spinning so fast in a limited amount of time. So consider and evaluate your RV’s future sale price before buying one.
RV Loan Refinance
Suppose, you had a bad credit score in the past and still applied for an RV loan. You had gotten rejected, which is quite natural.
But you have worked on it and improved it. If that’s the case, you can consider refinancing. In this way, you will be able to save more money, more than you think you would in early payments.
Many lenders RV refinancing. You can ask your lender if they do. Some lenders don’t do refinancing, you will have to search for a lender who does.
FAQ
What Credit Score Do I Need To Finance an RV?
The cut-off credit score to get an RV loan is based on the kind of loan scheme you select. Suppose, if you choose an unsecured RV loan plan, people with a credit score above 690 (which is an excellent credit score) and no-considerable debt usually receive the minimum rates.
How do These Loans Plans Work?
A lender can finance an RV loan that is secured with the vehicle. Arrangements to secure financing can be done by the dealer. The vehicle is used as the collateral when it is the secured RV loan plan. Upon failing to repay, you lose the vehicle, the lender will take it back.
As for the unsecured loan plan, the annual percentage rate is higher and repayment terms are shorter. Your credit will be affected if you fail to repay.
What Are The Terms?
Some online lenders and banks have repayment terms of five to twenty or more years on expensive RV purchases, and credit unions (they are NGOs) offer five to seven years of the timeline, for RV loans. Repayment terms can vary from lender to lender when it comes to both secure and unsecured RV loans.
You should discuss with your dealership representative about the terms and conditions before taking up the loan.
Conclusion
So that’s a wrap-up on who finances RV loans. Though it’s highly possible to get an RV loan for more than twenty years, you may not need that long of a time.
On an ending note, I would like to say that your budget should be your main focus while considering your RV loan plan.
