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RVs can be expensive, so it’s important to know all of your RV loan options before choosing the best RV model for your family. (Shutterstock)

Road trips with your family crammed into the back seat of a car and a trunk full of luggage can make driving cramped and uncomfortable. Flying can be expensive and stressful, with long queues and canceled flights. But with an RV, you can relax and see the country with all the comforts of home and enough space to spread out.

But RVs can be expensive, ranging from $35,000 to $300,000 depending on the RV class and amenities. You probably need a caravan loan. Since this is a big purchase, understanding your RV loan options, how these loans work, and where to get the best RV loan rates can help you Buy a camper without straining your budget.

What is an RV loan?

An RV loan is a type of long-term financing available through banks, credit unions, online lenders, and RV dealers to purchase a variety of trailer, fifth wheel, RV, camper, or truck camper.

It may also be possible to use a personal loan to purchase an RV, provided you can qualify for a large enough loan amount. Depending on your credit rating, interest rates on a personal loan may be comparable to or higher than an RV loan.

How do RV loans work?

RV loans are similar car loans, where you borrow money from a lender and agree to pay back the loan plus interest over a set period of time. Most RV loans are collateralized and backed by collateral (usually the RV) and generally have longer terms and stricter eligibility requirements than some other types of loans.

RV loan terms are typically between 10 and 15 years, but some banks offer financing for up to 20 years.

RV loans vs. car loans

While car loans and RV loans are a similar type of financing, they have some differences:

  • Loan Term — According to Edmunds, the average loan term for a new car as of March 2020 was about six years, followed by seven-year loans. Most auto loans in 2020 were longer than five years. RV loan terms can be as long as 20 years.
  • Loan Type — Like car loans, most RV loans are secured loans. But some smaller RV loans are unsecured, similar to personal loans.
  • Creditworthiness Requirements — Some lenders consider RV loans to be similar to a boat (or other pleasure craft) loan. Therefore, you may need a higher credit score to qualify than you would for a car loan.
  • Interest charges – Currently, interest rates on car loans and RV loans are about the same. However, RV loan rates vary widely depending on the type of RV, model year, features and upgrades.

Where to get a motor home loan

You can get an RV loan from banks and credit unions, as well as online rental companies and RV dealers. Keep in mind that since RVs are recreational vehicles, without good credit, qualifying can be difficult. Most lenders offer loans for both new and used RVs.

What credit do you need for a mobile home loan?

To get an RV loan, you typically need a credit score of 650 to 700, although individual requirements vary by lender. In contrast, you can usually get a car loan with a credit score of 579 or below, but your interest rate is much higher than with good credit.

If you’re looking to buy an RV but your credit score is bad, there are several things you can do before you buy to improve your rating:

  1. Pay all your bills on time.
  2. Don’t take on more debt than you can easily repay.
  3. Catch up on any overdue accounts.
  4. Pay off your credit card balances.
  5. Limit how many new credit accounts you open.

How to get an RV loan

The process to get an RV loan is similar to any other loan. You submit an application, which your lender reviews based on various factors such as credit history, loan amount, down payment, and debt-to-income ratio. It’s a good idea to pre-qualify with several lenders before completing a formal loan application so you can get an estimate of how much you can afford for an RV.

These are the steps you usually follow to get an RV loan:

  1. Set your budget. Before you buy an RV or apply for an RV loan, you should be aware of how much you can comfortably pay back. New RVs can be expensive. Used motorhomes can also be expensive, but they are cheaper in the long run.
  2. Save for a deposit. Many RV companies require a 10% to 20% deposit. Typically, the higher the down payment, the lower your monthly payments will be. You can also get better terms and a lower interest rate.
  3. Check your credit. Lenders usually offer better interest rates and terms to people with good to excellent credit ratings. Improve or repair your credit score could make it easier to secure RV financing.
  4. Shopping spree. Lenders offer different interest rates and terms, so it’s best to shop around for a loan to find the best deal for your financial situation.
  5. Negotiate. Check prices ahead of time so you know which dealers are charging for the RV of your dreams. Make sure you put down a reasonable down payment and boost your credit score so you can negotiate better terms when applying for financing. When negotiating loan terms, also consider fees and penalties such as prepayment penalties or processing fees.
  6. Apply for the loan. If you qualify for an RV loan, lenders will check your credit history and down payment. You can also consider your debt-to-income ratio, income and employment history, and take a look at your taxes to determine what rate and terms you’re offered.
Tags : credit scoreinterest ratespersonal loans
Richard Dement

The author Richard Dement