RVs, or recreational vehicles, have become extremely popular in the last few years, and if you are looking to finance the purchase, you’ll have a few options, including RV loans—usually installment loans. An RV loan can help cover the high cost of buying one of these vehicles. Not sure where to start looking for an RV loan? Below you’ll find the best places to begin your search, how to find the best loan option, and more information on these loans in general.
The Basics of How RV Loans Work?
RV loans help finance a vehicle purchase. There are several different types of lenders out there with specific requirements. Most lenders may ask that you only purchase from an RV dealer rather than a private seller. While other lenders may be flexible about where you buy from and how old the model is. With these loans, you’ll have to submit an application for approval, and a lender will let you know exactly how much you can borrow, along with the financing terms.
Unlike unsecured loans that don’t need anything, an RV loan is a secured loan. You likely won’t find unsecured RV loans, but other unsecured loans can work (more on that later below). With these loans, the RV involved with the purchase will act as security if you cannot repay it.
In these ways, an RV loan is pretty similar to an auto loan, but you can generally expect a much more considerable loan amount and longer repayment term than you would with a car loan. The average car loan lasts about 36-60 months, while an RV loan can last up to 240 months! Loan amounts for RVs will range from $10,000 to $300,000, with an average of around 100,000, depending on the type of RV you are looking at.
You will likely need a down payment of at least 10%, and anything more than that will just be helpful to reduce the amount of debt you are taking on. When it comes to a minimum credit score requirement, most lenders will ask you to have, at the very least, a good credit score (anything around 670). Anything below may require a larger down payment, cosigner, or co-borrower.
The Best Place To Look for an RV Loan?
You can find an RV loan at a few different places; here are your best bets for finding financing:
Banks and Credit Unions
Some banks and credit unions may offer RV loans, which can be a convenient option if you already bank with them. However, when working with these types of financial institutions, you will likely need to have a good credit score for approval. With good credit, you may get a reasonably competitive interest rate.
RV dealers may offer in-house or third-party financing for their customers. With these options, you may get more flexibility with a bad credit score or credit history than a bank or credit union. Additionally, there may be special financing arrangements with RV dealerships since you are purchasing from them. And so, be sure to check out in-house financing options.
Find an Online Lender
Online lenders are a great place to find RV financing. A simple Google search can help you get started. Online lenders will likely have the lowest interest rates since they don’t have the same operating costs as in-person lenders. You’ll probably also find the most flexibility with online RV loan lenders. When searching for online lenders, ensure the websites you visit are secure, and the lenders you apply with are legitimate.
Finding the best loan does have to do with where you get your loan; however, other indicators will help you find the best RV loan. Continue reading to find out what those factors are.
What Loan Terms To Compare When Finding the Best Loan?
If you don’t have a ton of experience in borrowing money, then you may not be familiar with the different aspects of any loan that should be looked at. You can compare your loan options by applying for pre-approval to find the best RV loan. Here are some of the loan terms you should pay attention to altogether to find the best loan possible for your financial situation:
The RV Loan Rates
In most cases, lenders will give your interest in terms of APR (annual percentage rate), which provides you with the amount of interest your loan will be charged annually. The higher the percentage of the RV loan interest rates, the higher the loan cost. Generally, the better your credit score, the lower your interest rate. Interest is the most expensive part of a loan, so finding a competitive rate will be a huge factor in finding the best loan. But it shouldn’t be the only thing you look at.
The Monthly Payments
The monthly payments for a loan are a crucial part of finding the best loan. You’ll want a monthly payment that is affordable and easily manageable. And this manageability is even more critical with RV loans because they tend to be pretty long-term.
The Loan Term
How long or short your loan is another important factor when finding the best RV loan. The longer your loan, the more interest you will pay, but your monthly debt payments will be more manageable. While a shorter loan will mean less interest but a higher monthly payment. Try and figure out what loan length works best and find an accommodating loan.
Details of the Loan Agreement
Your loan agreement will have all the small details of your loan, and it is imperative to understand them before signing up for a loan. Your loan agreement can help you avoid fees and ensure you don’t unknowingly break the loan contract. For example, if you know that there are prepayment penalties, you can avoid paying your loan early.
The Loan Amount for the Recreational Vehicle
The loan amount is another important variable to look at for your RV loan. If you are only looking to take out one loan, then your RV loan should cover the entire cost of your purchase. Rember, with loan amounts, you never have to borrow more than the maximum loan amount you need.
The RV Lenders Themselves
Another thing to pay attention to is the reputation of the lender. The last thing you want to do is get into a long-term contract with a lender who is not flexible. Getting out of an RV loan is possible, but it can get complicated. Researching a lender before signing up for a contract can help you avoid that! And so check out past customer reviews and ratings on a RV loan lender.
As you can see, finding the best RV loans means looking at several factors.
How to Begin the RV Financing Process?
Here is a step-by-step guide you can use with the RV loan process:
Figure Out How Much You Want To Spend
The first step you’ll need to take is to sit down and figure out what kind of RV you can afford. The cost of an RV can vary quite a bit, and a lot of what you will need can depend on the kind of equipment and vehicles you already have. Familiarize yourself with the differences in RV types and additions. Then, look at your budget and ensure you have sufficient income to afford a loan before moving forward. An RV loan will be a long commitment, so if your income fluctuates, you should take that into consideration.
Find a Lender You Want to Work
The next step is to search for a lender you want to work with. There are many lenders you can look at to get an RV loan. Just like you would with personal loans, credit cards, etc., applying for pre-approval will be a good idea to get a better idea of interest rates, loan amounts, and repayment terms. Once you compare different lenders and RV loans, you can choose an option that works best for you.
Get Loan Approval With a Lender of Your Choice
Once you find a lender you want to work with and get through pre-approval, you’ll have to move forward with final approval. A lender will conduct a Hard credit check for final approval, impacting your credit scores. You’ll also have to send some documents proving your income and identity.
Go Find an RV
Finally, you’ll get the loan funding once you are done with your application. In most cases, it will be sent to your savings or checking account. Once you have your money, you can begin the fun part—looking at RVs! There are RV dealerships all over the country, and chances are there are a few around you. Head to a few different dealerships to see what kinds of RVs they have and what the prices look like. Be strategic about the time of year when you shop. For example, seasonal sales can mean saving a good amount of money.
Using a Personal Loan for an RV Purchase
Sometimes buying a used RV from a private seller can mean saving thousands of dollars; however, many RV loan lenders won’t allow you to do this. The good news is that a personal loan can work if you need to make a private RV purchase.
A personal loan is one of the most versatile loan options available. Even if you have bad credit, you could get personal loan approval with the right lender, and there may not be a minimum credit score cutoff if you have enough income. You find personal loans at a bank, credit union, or with a private lender. Loan amounts can vary and can cover the cost of an RV.
The interest rates for these loans can be highly competitive, and the loan will be repaid in monthly installments, which can be pretty helpful for those on a budget. And so, if you are looking for an RV loan alternative, start with these loans.
Best RV Loans Of 2022 | Forbes Advisor