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A recreational vehicle, also known as an RV, serves as a unique hybrid between a vehicle and a home. They’re a wonderful way to see the country without the hassle of flying, and you have built-in accommodations wherever you go. But RVs can come with a hefty price tag.
Since an RV doesn’t fall in the typical car category and is often a much more expensive purchase, RV loans exist to help consumers finance these large, unique purchases.
What Is an RV Loan?
An RV loan helps you finance a purchase of a new or used RV, motorhome or camping trailer that you can’t afford to purchase outright. Because RVs range from small and affordable to large and luxurious, RV loans also run the gamut with size and terms.
RV loans also are separate from auto loans because they’re typically larger, more complicated purchases. Depending on the lender, you can find RV loans for around $25,000 that are repaid over a few years, but you also can find loans as hefty as $300,000 that are repaid over 20 years.
For very small RV purchases, you have the option of using a personal loan instead. For example, Bank of the West requests that customers use personal loans for RV purchases under $10,000 rather than RV loans.
How RV Loans Work
As with any other loan, prospective borrowers submit an RV loan application that the lender reviews and evaluates based on several factors. Your credit plays a large part in your eligibility and interest rate, as does the size of the loan and your down payment. In addition to checking your credit, lenders may look at other aspects of your financial health, such as your net worth or cash flow/income, employment and housing.
Borrowing requirements can be stricter for larger loans, so the amount of documentation required also depends on the lender and the size of the loan.
If you plan to obtain an RV loan from a lender of your choice rather than through the dealership, you can apply and get pre-approved before you go shopping for your RV. Your lender may offer you a few different term options, allowing you to decide on the timeframe in which you’ll repay the loan (this impacts your interest rate and monthly payments). For smaller RV loans, the terms may be only for two or three years, while larger RV loans may have terms as long as 10 to 20 years. Interest rates are usually fixed, so your payments remain consistent over the life of the loan.
RV loans also require a down payment, often between 10% and 20%. Your lender may also require an RV inspection, which usually costs between $150 and $200.
Unsecured Loans vs Secured Vehicle Loans
There’s one thing all auto loans have in common: they’re secured, with your car serving as collateral. In other words, if you default on your loan, the lender can repossess the car. On the other hand, most personal loans are unsecured, where no collateral is required and you’re approved based solely on your creditworthiness.
When it comes to RV loans, some are secured and some are unsecured. In most cases, smaller RV loans are unsecured and function more like personal loans, while higher-dollar loans for luxury RVs are secured and work more like an auto loan or mortgage.
For example, Truist Bank—formerly SunTrust Bank—offers unsecured loans for purchases of RVs, including towable campers and trailers, for amounts between $5,000 and $100,000. But if you’re purchasing a higher-value RV, such as Class A or Class C motorhome, Truist requires the loan to be secured, using the motorhome’s title as collateral.
Keep in mind that if you fail to make your payments on a secured RV loan, the lender can repossess your RV. But because the collateral makes the loan less risky to lenders, interest rates are often lower on secured RV loans.
Where to Get an RV Loan
Borrowers typically have two major options for where to obtain an RV loan:
- RV dealership. Often, the easiest way to apply for a loan is at the dealership once you choose an RV. The dealer will typically present you with a few financing options, either through partnerships with various lenders or in-house.Financing an RV through the dealership also may give you more bargaining power and flexibility on the vehicle price or APR.
- Online or traditional lender.You can also obtain an RV loan through a financial institution, such as your bank or credit union. If you go this route, you can get preapproved to borrow a certain amount before you head to the dealership. This can be helpful if you’re not sure how much RV you can afford—or if you’re worried about whether your credit score will qualify you for acceptable lending terms.
However, if you plan to buy a less expensive RV, such as a smaller used one, it may make more sense to apply for a personal loaninstead. You can do this before you go RV shopping; you receive the money as one lump sum, so you can then go make the purchase outright. Just keep in mind that some lenders limit what borrowers can use personal loans for, so check with the lender before signing on the dotted line.
How to Apply for an RV Loan
Follow these steps if you’re ready to finance a new or used RV:
1. Determine Your Budget
RV costs vary substantially depending on the types, age and size of the vehicle. What’s more, add-on features and interior finishes can even cause the price of small RVs to skyrocket quickly. Before you start shopping for an RV loan, consider what you need in an RV and how you plan to use it. Will you be traveling full-time or are you more of a weekend warrior? Do you plan to camp in cold climates or rugged terrain so that you’ll need a winterized or off-road RV?
Once you have a picture of your RV lifestyle in mind, make a list of must-have and nice-to-have features and research the average cost of RVs that meet those requirements. Then, evaluate whether that cost is consistent with your current financial situation and reevaluate if necessary.
Alternatively, you can calculate how much RV you can afford by reviewing your finances and determining how much room you have in your budget each month. Remember, though, that this amount will have to cover everything from debt service and insurance to maintenance, storage and fuel for travel.
2. Check Your Credit Score
RV loan APR is in large part determined by a borrower’s credit score. Other factors—such as the size of the loan—also play a part, but creditworthiness can make or break RV financing. So, to qualify for the best RV loan rates, make sure your credit is in the best shape possible. Some lenders are stricter than others but many traditional lenders may not approve RV loans for bad credit. For example, Bank of the West says credit scores of 700 or higher are preferred.
Other lenders, however, specialize in RV loans for bad credit. Southeast Financial says that while most RV lenders require credit scores of 720 or above, they have no minimum credit score requirement and review each application on a case-by-case basis. Another option is My Financing USA, which has RV loan options both for those with good credit (minimum score of 680) and bad credit (minimum score of 570).
There are plenty of ways to improve your credit score, from always paying your bills on time to reducing the amount of debt you carry. Be aware that some lenders also may offer discounts if you enroll in auto-pay.
3. Save a Down Payment
In general, RV dealerships require a down payment of 10% of the purchase price—at a minimum. Others may require, or at least prefer, a 20% down payment. To ensure you’re ready to take the leap when you find your perfect RV, start saving for a down payment as soon as possible. A larger down payment will ultimately reduce your monthly payments and can decrease your interest rate and the overall cost of the loan.
If you have less than stellar credit, providing a larger down payment may also increase your chances of RV loan approval because it lowers the amount you need to borrow and reduces risk to the lender.
4. Shop for a Lender
If you decide to finance an RV through the dealer, they will show you loan options from the lenders they partner with. This is the most convenient option, since they take care of the loan logistics for you, but they may not always have the best rates. Some RV dealerships also offer in-house financing options that are more lenient with credit, but they can come at a high cost.
However, many people choose to finance their RVs through a private online or traditional lender. If you go through a private lender, you can typically complete the application online or by phone and get preapproved before you even set foot in the dealership. This indicates to the seller that you’re a serious buyer, which can put you in a better position to negotiate on the price tag.
Once you commit to buying an RV, you will send the purchase agreement to the lender who preapproved you, and they’ll finalize the loan documents. The lender then sends the funds to the dealer to complete the process. This option may be ideal if you want to stick with your existing bank or credit union, or if you find a rate you can’t pass up.
5. Negotiate for the Best Terms
Before you agree to purchase an RV, make sure you’re getting the best price possible. Some dealerships markup RV prices by as much as 50% and many expect customers to haggle on the price. Depending on the RV and the circ*mstances, you may be able to get the price down as much as 20% to 30%off the sticker price.
You may be able to take advantage of extra incentives or amenities that make the purchase price more acceptable, such as free maintenance or upgrades. By reducing the purchase price of an RV, you’ll cut back on the overall costs of financing—even if you don’t qualify for a low APR.
RV Loan Frequently Asked Questions
How hard is it to get an RV loan?
Just like any loan, an RV loan requires a thorough assessment of your credit and finances. When underwriting RV loans, lenders look for a strong credit history and solid income that shows a likelihood of repayment. If your credit isn’t in great shape, it may be hard to get approved for an RV loan. However, some lenders specialize in RV loans for bad credit by evaluating applications on a case-by-case basis, rather than just looking at credit history.
Can someone cosign an RV loan?
Some types of loans allow borrowers to have co-signers, which is when you get a loved one with a stronger credit history to agree to take on the financial responsibility with you. When it comes to RV loans, it’s up to the lender; some permit it, but many don’t because they see it as a sign that the borrower is too riskyfor such a large purchase.
For example, Bank of the West does not allow cosigners on RV loans. However, some lenders are open to it, so if you think you’ll need a cosigner in order to qualify for an RV loan, make sure to ask if this is an option before you proceed.
What is the current interest rate on RV loans?
In general, RV loan interest rates range from about 4.25% up to 11% or more, depending on the loan amount, term and the borrower’s creditworthiness. However, these are just starting rates for customers with the best credit. What’s more, rates vary from lender to lender, so make sure to shop around before choosing the terms that fit your needs. Even a slightly lower interest rate can make a massive difference in the long run.
Can you buy an RV with an auto loan?
No, you typically cannot use an auto loan for a recreational vehicle. RVs are usually much more expensive purchases, so the loans are larger and require a more in-depth underwriting process. Lenders often consider factors such as your liquidity, net worth and cash flow—factors that aren’t usually reviewed for auto loans.
