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How to Finance Your Camper With an RV Loan

How to Finance Your Camper With an RV Loan

RVs can help you make some priceless memories. Still, no matter how priceless the memories are, the dealership will price that RV. With the cost of RVs rising, many choose to finance their purchase with RV loans.

Getting financing can be a painful and challenging process. Today, we’ll help you look at how to finance your camper with an RV loan. Let’s get started.

What You Need to Know About RV Financing

We think you need to know a handful of things before you start applying for loans. A few of these can significantly enhance your odds of being approved and getting the best interest rate.

RV Buying Guide: RV Financing

It’s Harder Than Financing a Car

If you thought financing a car was complicated, an RV is much more difficult. Some have said it’s even as complex as applying for a home mortgage. 

Banks will look at several factors, including your debt-to-income ratio, employment history, and income. They’ll likely go through it with a fine-tooth comb and will find any red flags like too much debt, missed payments, or bankruptcies.

Banks typically see RVs as luxuries. Finance departments also frown upon the idea of full-time RV living, and some banks will refuse to approve your loan application if they discover you plan to travel full-time in it.

The RV Typically Has to Be Less Than 10 Years Old

Banks often have a hard time approving loans for RVs 10 years old or more. They depreciate incredibly fast and don’t last long. If you want to finance an RV older than 10 years, you may end up having to apply for a personal loan. 

Pace Arrow Class A Motorhome
If the RV you’re buying is more than 10 years old, you might have to apply for a personal loan.

However, it’s important to note that these will come with a higher interest rate, will require you to have good credit, and may even require a large down payment. The RV will serve as the collateral, and if you miss a payment or two, they can repossess it.

You Need a Down Payment for an RV Loan

No matter how much you plan to finance, you’ll likely need a down payment. The more you can pay upfront, the higher your chances of approval. Paying more as a down payment can help lower your monthly payment and avoid being underwater on your loan the minute you drive your RV off the dealership lot.

Banks like to see down payments because that shows you have cash on hand and appear financially responsible. It’s also a good idea to make sure you pay your taxes and any other fees in cash and not finance them. This helps improve your chances and avoid paying more than you need to in the long run.

Down payment on RV loan
A large down payment can help lower your monthly payments.

Beware of Becoming Upside-Down on the Loan

Travel trailers, fifth wheels, and Class Cs depreciate incredibly fast but often at different rates. NADA Guides states that a travel trailer will decline 40% after five years, 45% for a fifth wheel, and 38% for a Class C.

It’s important to get the best deal and pay down your loan as much as possible. Owing more than your RV’s worth could result in you writing a hefty check should you want to sell or trade it in.

Pro Tip: Buying your RV is only the beginning. Owning and maintaining one can also be expensive. Make sure you can afford the loan payment and upkeep.

What Credit Score Do You Need to Finance an RV? 

Getting financing for an RV can be difficult and requires a relatively decent credit score. A score below 650 will make it challenging to get the funding for a loan. 

Man checking his credit score
While your credit score isn’t the only factor lenders consider, having a high score can help you get approved.

Banks would like to see your score closer to 700 or above. A score in this range shows the bank you have consistency in payment history and low balance utilization.

What Kind of RV Can You Get Financing On? 

Financing is typically available for all types of RVs. It doesn’t matter if it’s a pop-up camper, travel trailer, fifth wheel, or motorhome. 

However, banks may not agree on the value of used RVs, making it more difficult. This would mean you would need to pay a larger down payment to bring the financed amount down to the value the bank assigns. 

What Are Typical RV Loan Terms?

Loan terms will vary from one loan to the next, but a typical RV loan will last 10 to 15 years. Depending on the value of the RV, some banks, credit unions, and finance companies will extend the length of the loan to 20 years.

Woman reviewing RV loan terms
Because RVs depreciate considerably, a long-term loan could have you making payments on an RV that isn’t even worth your loan balance.

Interest rates will also vary significantly from loan to loan. However, having an excellent credit history and a down payment can give you a better rate. A lower interest rate helps ensure you don’t waste money on interest over the life of the loan.

How Do RV Loans Work? 

RV loans work similarly to car loans. The bank will hold the title until the loan terms have been fulfilled. When financing, many dealerships or finance companies expect the purchaser to pay at least 10% as a down payment but prefer 20%. 

RV Loan Application
There’s more to getting an RV loan than filling out an application.

How to Get an RV Loan

When it comes time to get an RV loan, you need to make sure to take a few steps. Let’s take a look, so you’re ready to sign on the dotted line when you step into your local dealership.

Have an RV in Mind

Selecting the RV ahead of time allows you to shop around to get the best deal. You can often save a considerable amount of money if you’re willing or able to drive out of the way to get the unit.

RV dealers want your business as much as you want that new RV. Make them work for the sell and don’t be afraid to negotiate. You may get lucky and get some extras thrown in or get a price reduction.

Having the RV selected ahead of time allows you to run the numbers and ensure you know what to expect when it comes to the monthly payment.

Still looking for the right rig for your full-time travels? This article can help you narrow your search: How to Determine the Best RV to Live in Full-Time

Motorhome, Fifth Wheel or Travel Trailer For Full Time RV Life

Set a Budget

It’s important to set a budget when it comes to your purchase. One mistake that’s easy to make is disclosing your maximum monthly payment amount. Focusing on the monthly payment amount allows the dealership to extend the loan or play with the APR to make the most money.

When you focus on the total price of the RV, the rest of the numbers can fall into place. You don’t want to pay more for an RV only to have a higher interest rate and a longer loan term. This will cost you more in the long run and likely leave you upside down.

Come up with a set amount you’re willing to pay for the RV and work with the dealer on that. Don’t be bullied into negotiating any other number, as it will likely end with you losing more in the end.

Tom and Cait working with their laptops
It’s crucial to budget wisely before and after purchasing your RV. Consider creating a budget like we did.

Save a Down Payment

One of the most important aspects of being ready to sign is having a down payment. You want to have at least 10%, but preferably 20%, to put down at the time of signing. This down payment helps reduce the amount of money you finance and helps avoid being upside down on your loan from the start.

Many dealerships will require you to pay $1,000 as a deposit to reserve the unit. This $1,000 will likely go towards the down payment and count in your 10 to 20%. 

Check Your Credit

You can use one of the many free services to check your credit. You want to make sure you have no surprises on your credit before you start applying for loans. Each time you apply for a loan, they will run a hard credit check. Having too many hard credit checks on your credit history can be a negative sign to lenders.

Woman reviewing her credit history
It’s important to have a thorough knowledge of your credit history before applying for a loan.

Make sure you take care of any issues with your credit history before applying. You want to have plenty of time to pay off any debt or take care of any balances to present the best possible profile for the bank or financing service.

Research and Compare Lenders

If you purchase through a dealership, they’ll likely recommend a few lenders for you. The dealer has partnerships and gets a kickback for each loan they help them secure.

However, most dealers won’t tell you that you can shop around to various lenders to get the best deal. If you have an established relationship with a bank, credit union, or another lender, it may be worth giving them a call and seeing what terms they can offer on a loan. A simple phone call can save you a few percentage points or two and likely thousands of dollars in the long term.

Woman calling to get RV financing
Don’t be afraid to shop around for the best loan rates and terms. It could save you a lot of money in the long run.

Apply and Select an RV Loan

It’s important that the terms work for you when you apply and select a loan. You want to run the numbers as much as possible to see how much you’ll pay over the term. A low monthly payment is nice, but it can cost you thousands of dollars long term.

You should also be ready to show your financial documents during this process. This can include bank statements, deposit statements, and check stubs from your employer. The lender will use all of the documents and the information you’ve submitted to decide whether or not you qualify for the loan. Their biggest concern is ensuring the loan gets paid in full and that you won’t default on it.

Is Getting an RV Loan Worth It?

While many will say cash is king and that you shouldn’t buy an RV without paying cash, it’s not always possible. Some big rigs and motorized RVs easily approach $100,000 or more, and not everyone has that much cash on hand.

Winnebago Revel Class B
This Winnebago Revel costs over $190,000 new. The average RV buyer likely doesn’t have that kind of cash.

Some would also argue that getting a loan is worth it because it allows you to invest the money, which will have a greater return than if you paid cash. It’s a tricky decision and one that you can only decide based on your unique circumstances. 

If you have questions, you can always consult a third-party accountant or money advisor to help you make the best decision.

Do you think RV loans are worth it? Drop a comment below.

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