Writer and Motivational Speaker
If outdoor adventures, open roads, and a nomadic lifestyle thrill you, owning an RV might have crossed your mind multiple times. Perhaps, you long to hit the road with your dream RV but haven’t done so due to its costs.
It’s completely understandable since buying an RV can be expensive. However, there’s no need to hold yourself back in getting that RV you’ve wanted for so long. There are plenty of options that can help you get that dream RV, and financing has become an essential tool for most RVers.
But just like any financial decision, proper research is necessary to make the most of your RV purchase. To guide you in your decision-making, we’ve highlighted different financing options you need to know for your dream RV.
What is an RV loan?
Since an RV purchase can be costly, ranging from $10,000 to $500,000 or more, many people turn to some form of financing to acquire one. Thus, they apply for an RV loan to purchase a motorhome, travel trailer, camper, or any RV they want.
An RV loan is a type of long-term financing where an institution agrees to lend you the money to buy an RV, and you’ll pay it back on a predetermined period along with its interest. RV loans are mostly secured loans, which means the RV itself serves as collateral, and the lender has the right to repossess it if you can’t pay the loan.
Compared to car loans, the terms of RV loans tend to be longer, though it may depend on how much you’re borrowing. But generally, an RV loan amount of $10,000 to $25,000 may last up to two or three years. There are many RV loans, though, that have a term of ten to fifteen years, and several lenders may extend the term up to twenty years for loans of $50,000.
Just like any other type of loan, there are several financing options to get an RV loan. Each option has benefits and downsides that you might want to take a look at.
You can get an RV loan at a dealership, and it is often the fastest option to get a deal for your dream RV. Dealers usually have connections with multiple lenders or financing programs, such as My Financing USA, that offer RV loans. Thus, they may be able to extend you an attractive financing offer.
Because RV dealers want to make a sale, they can stretch out a competitive interest rate for you, especially if they know you’ve been shopping around. However, rates still tend to be higher through dealerships than other financing options due to extra costs and fees.
Thus, you need to be careful of the rate and fees offered to you by RV dealers. If you want to ensure that you get the best deal of financing, you would need to compare rates and fees from different lenders. After all, the dealership that genuinely wants your transaction will match the lowest offer you received.
Banks and credit unions
If you hesitate to get an RV loan from a dealership, many banks and credit unions will finance an RV directly through you. One advantage of directly dealing with the bank or credit unions is negotiating your interest rate. US Bank offers flexible financing to purchase or refinance new or used recreational vehicles.
However, it might be harder for you to secure affordable financing through banks or credit unions if you have bad credit. They can also be restrictive in terms of the maximum amount you can borrow for an RV and its loan term. A credit union offers a little more flexibility than banks.
Another option to search for an RV loan is to review offers from online lenders. They may also be able to give you an affordable interest rate, though it may still depend on your credit status.
A loan from online lenders can be a reasonable way to finance your RV since they have lower running costs than traditional financial institutions like banks and credit unions. Because of that, they can utilize the savings by offering cheaper rates to their clients.
Besides that, online lenders have fast funding and an easy application process. They are also more convenient since you can access them online through apps. However, they might not be a good option if you want face-to-face customer service.
RV loan alternatives
Traditional RV lenders may not favor smaller trailers, older RVs, and other less-conventional choices. However, there are campers, motorhome, and travel trailer financing alternatives you can rely upon in case your preference won’t qualify in the traditional and automotive financing.
Home equity loan
If you’re a homeowner, a home equity loan can be your alternative to financing for an RV. With a home equity loan, you may get a lower monthly payment and find you have more borrowing options.
You can usually leverage between 80 to 100 percent of your equity, depending on your creditworthiness and your lender. Thus, you may be able to get a considerable amount of loan to purchase your dream RV. But since you are using the value of your home as collateral, you can lose it if you fail to repay your loan.
You can opt to take out a personal loan if you don’t qualify for an RV loan due to poor credit. But since this type of loan is unsecured, you won’t be able to use the RV as collateral. This means that you should expect higher interest rates and shorter terms.
Though a personal loan is likely a more expensive and riskier option to purchase an RV, it can also be a better choice in certain situations. For instance, if you prefer to purchase a used RV, but the bank may not consider its worth as good collateral, you can resolve it through a personal loan.
You may be able to use your credit card for smaller RV purchases by swiping it at the dealership. It can also be done through a cash advance or courtesy check. Though credit card companies might offer you 0% financing for the first year, it can increase to 10% or 20% the next year. Thus, it would be beneficial to think twice before rushing on this option.
Purchasing an RV is a big decision to make. When you’re planning to finance your RV purchase, it is essential to consider your needs and resources besides the financing option. Because even if an RV can be an attractive investment, you won’t be able to enjoy it if paying the monthly costs of your RV loan is beyond your means.
Lauren Cordell is both a writer and motivational speaker whose interests usually revolve around finances, business, and investments. While she advocates on the essential benefits of traveling, she also believes that financial preparedness is the first key to fully enjoy it.