What are RV loans and where can I get one?

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Recreational vehicles can be expensive, so you’ll want to know all of your RV loan options before deciding on the best RV model for your family. (Shutterstock)

Road trips with your family stuck in 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 a motorhome, you can kick back and see the country with all the conveniences of home and plenty of room to spread out.

But RVs can be expensive, ranging from $35,000 to $300,000, depending on the class and features of the RV. You will probably need an RV loan. Because this is a big purchase, you’ll want to understand your RV loan options, how those loans work, and where to get the best RV loan rates to help you. buy a motorhome without breaking your budget.

What is an RV loan?

An RV loan is a type of long-term financing available from banks, credit unions, online lenders, and RV dealerships to purchase a wide variety of travel trailers, fifth wheels, motor homes, motor homes or motorhomes.

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

How do RV loans work?

Recreational vehicle loans are similar to car loans, where you borrow money from a lender and agree to repay the loan, plus interest, over a set period of time. Most RV loans are secured and backed by collateral (usually RV) and usually come with longer terms and stricter qualifications than some other types of loans.

RV loan terms typically range from 10 to 15 years, but some banks offer financing for up to 20 years.

RV Loans vs Auto Loans

Although auto loans and RV loans are a similar type of financing, they have a few differences:

  • Term of the loan – The average loan term for a new car was around six years in March 2020, with seven-year loans not far behind, according to Edmunds. Most auto loans in 2020 were over five years. RV loan terms can be up to 20 years.
  • Type of loan — Like auto loans, most RV loans are secured loans. But some smaller RV loans are unsecured, much like personal loans.
  • Credit Score Requirements — Some lenders consider RV loans to be similar to getting a loan for a boat (or other pleasure craft). So you might need a higher credit score to qualify than for a car loan.
  • Interest rate – Currently, interest rates for auto loans and RV loans are about the same. But RV loan interest rates vary widely depending on RV type, model year, features, and upgrades.

Where to get an RV loan

You can get an RV loan from banks and credit unions, as well as online lenders and RV dealerships. Keep in mind that because RVs are recreational vehicles, qualifying can be difficult without a good credit score. Most lenders offer new and used RV loans.

What credit score do you need for an RV loan?

To get an RV loan, you’ll generally 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 lower, but your interest rate will be much higher than if you had good credit.

If you want to get an RV but your credit score is less than great, there are several things you can do to improve your score before you buy:

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

How to get an RV loan

The process for getting an RV loan is much like any other loan. You will submit an application which your lender will review based on several factors such as your credit score, loan amount, down payment and debt to income ratio. It’s a good idea to be prequalified with several lenders before completing a formal loan application to get an estimate of what you can afford for an RV.

Here are the steps you’ll typically take to get an RV loan:

  1. Set your budget. Before shopping for an RV or applying for an RV loan, understand how much you can comfortably afford to pay back. New RVs can be expensive. Used recreational vehicles can also be expensive, but may be more affordable in the long run.
  2. Save for a down payment. Many RV companies require a 10% to 20% down payment. Generally, the larger 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 generally offer better rates and terms to people with good to excellent credit. Improve or repair your credit score could make it easier to get financing for RV.
  4. Compare the prices. Lenders offer varying rates and terms, so it’s best to shop around for a loan to find the best deal for your financial situation.
  5. To negotiate. Research prices beforehand so you know what dealerships charge for your dream RV. Think about a reasonable down payment amount and increasing your credit score so you can negotiate better terms when applying for financing. Also consider fees and penalties, such as prepayment penalties or processing fees, when negotiating loan terms.
  6. Apply for the loan. When qualifying you for an RV loan, lenders look at your credit score and down payment. They may also consider your debt-to-equity ratio, income, and employment history and review your taxes to determine the rate and terms to offer you.

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