RV Loans: What You Need to Know

A growing number of people are forgoing permanent residences in favor of the mobile lifestyle afforded by a van, boat, or recreational vehicle (RV). There has been a recent uptick in the popularity of “van life,” an alternative way of nomadic living made possible by the relatively low cost of owning and maintaining a van.

RVs are less costly than a conventional house but more expensive than a car, so it’s important to remember this when budgeting for one. Obtaining a loan for a recreational vehicle is one way to handle the cost.

What Are RV Loans?

If you want to buy a recreational vehicle (RV), motorhome, or camper trailer but don’t have the cash on hand, an RV loan can help you make the purchase. Recreational vehicle loans come in a wide variety of sizes and maturities to match the wide variety of recreational vehicle sizes and prices.

A recreational vehicle loan is not the same as a car loan because an RV is a far more expensive and complex purchase. You can get an RV loan for as little as $25,000 with payments spread out over a couple years, or you can get one for $300,000 with payments spread out over 20 years.

A personal loan may be a better choice than a credit card for a smaller RV. Bank of the West, for instance, discourages the usage of recreational vehicle loans in favor of personal loans for RV purchases under $10,000.

How Do RV Loans Work?

Borrowers apply for RV loans just like they would any other type of loan, and the lender considers a number of criteria before making a decision. In addition to the loan amount and down payment, your credit score also plays a significant role in determining your interest rate and loan eligibility. Lenders may also consider your assets, income, employment history, and where you live when making a decision about a loan, in addition to your credit score.

The amount of paperwork needed to secure a loan is influenced both by the loan company and the loan amount, with the former often requiring more proof of income and creditworthiness.

If you’d rather not acquire a loan from the dealer for your recreational vehicle, you can apply with a lender of your choosing and also get pre-approved prior to buying. You may be given several alternatives for the length of time during which you must pay back the loan by the lending institution. How this plays out will determine the interest rate and hence your monthly payments. The loan term for a smaller recreational vehicle could be as short as 2 – 3 years, while the duration for a bigger RV could be as long as ten or twenty years. Loan repayments are predictable because of the loan’s set interest rate.

An RV loan typically requires a down payment of 10% to 20%. In addition, RV inspections cost between $150 and $200 and may be required by your lender.

Who Offers RV Loans?

• Dealer-arranged financing. Some RV dealerships have their own financing department or work with outside lenders to provide customer financing. Dealer financing may also allow you more leeway in negotiating the purchase price of the vehicle and the interest rate. When considering dealer financing, it is important to read the tiny print so you understand the terms you are agreeing to. Don’t forget to look around at several loan programs so you can locate the one that works best for you.

• Banks. You could also be able to get a loan for your recreational vehicle through a regular bank. Loans for recreational vehicles are available from a minority of financial institutions. It’s possible to get a better interest rate on an RV loan if you open a checking account at the same financial institution. When opposed to online lenders, banks have more stringent lending requirements. You may need an account with certain lenders before being approved for a loan.

• Credit Unions. Credit unions, which are usually run by volunteers and not for profit, offer more competitive interest rates and fees than banks. Credit union loans are often on the lesser side, so you may not be able to obtain enough for a luxury RV. It is not necessary to be a member of the credit union to ask for a loan, however you will need to join in order to receive the loan funds.

• Money-Lending Websites. You can receive a personal loan from a number of different lenders without ever having to leave your house. One of the fastest quickest ways to secure a personal loan is through an online lender. If you’re looking for an RV loan online, it’s in your best interest to compare as many different options as possible. 

How to Get RV Loans

Banks, online lenders, and even RV dealerships all provide financing for recreational vehicle purchases. You are need to fill out an application in order to apply, and the lender will analyze and assess your application. It is a good idea to seek quotations from a number of different lenders so that you can be sure you are getting the best possible interest rate, loan conditions, and repayment schedule for your specific requirements.

You may be able to submit an application for finance and get pre-approved for it if you are dealing closely with a lender. This will allow you to determine how many funds you have available for spending before you begin looking for an RV.

After you have selected the RV that you want to buy and have finished the process of getting the loan approved, you will be required to sign a loan agreement that outlines the terms of the loan. It is possible that the money will be placed into your account as quickly as the following business day, but this will depend on the lender.

What to Consider Before Taking Out RV Loans?

Loans for recreational vehicles (RVs) are a form of long-term finance that can be used to buy a camper, travel trailer, or motorhome. RV loans are not the same as vehicle loans, however they do share some characteristics with auto loans. The vehicle itself acts as collateral for a loan, similar to how an auto loan uses the vehicle itself.

A recreational vehicle loan would typically have payback durations ranging from one to 15 years; however, certain lenders may offer repayment timelines that are as long as 20 years. However, borrowers who are in a position to make larger payments may choose to have their periods shortened.

Before submitting an application for an RV loan, you will need to have determined how much funds you wish to borrow and, in most cases, the type of RV that you are planning to buy in order to qualify.

What Is the Current RV Loan Interest Rate?

The annual percentage rate (APR) of interest charged on some RV loans can range anywhere from slightly more than 4.5 percent to around 18 percent. A variety of different terms can be found for RV loans, including the annual percentage rate. The terms of the loan, the amount borrowed, the amount of the down payment, and the interest rate all have a role in determining the overall cost of the loan.

An annual percentage rate (APR) for an unsecured RV loan might be anywhere from 6% to 36%. The annual percentage rates for secured loans are often lower than those for unsecured loans, with many lenders giving rates in the single digits.

A long – term loan term means that you will pay interest on the loan for a longer period of time; conversely, a shorter loan term means that you will pay interest on the loan for a shorter period of time. Although the majority of lenders provide loan periods of up to ten to fifteen years, there are some that would let you repay the money for a period of twenty years or perhaps even longer.

Bottom Line

There are a variety of lenders who can provide finance for the purchase of a brand new or used recreational vehicle (RV). However, being accepted can be just as difficult as obtaining a mortgage, which is why you should figure out how much money you have to borrow in advance and make sure that your credit score and income are sufficient to back an effective application. It is also a smart strategy to compare around to a number of different lenders in order to find the greatest offer that fits your requirements.