Financing an RV: What to Look for Before Signing the Contract

One of the reasons why people purchase recreational vehicles or RVs is to experience flexibility and freedom in their lives. It’s like owning a home and a car at the same time. You can travel across the country without worrying about your accommodation. It is not unknown to many that being a cross between a house and a vehicle, Financing an RV often comes at a hefty price. You might really wanna make sure that your loan contract will pan out smoothly and will not get between you and the flexibility and freedom you are gunning for.

 

So, before signing the contract, make sure that you understand all the details of the loan agreement, specifically the interest rate, and repayment terms. Basically, the amount of the loan that you would be granted depends on various factors like your credit score, debt-to-income ratio, and your annual income. Interest rates vary from bank to bank. While it is important to get a low-interest rate, you should also consider the length of the loan term.

You should ask your bank, “How long can you finance an RV?” This is important because a longer loan term would mean a lower monthly amortization rate. However, it would also mean a higher effective interest rate. As for the maximum length of the RV loan, it depends on various factors, including your credit standing and the amount of the loan, among others. On average, it could be between 10 to 15 years depending on the lender. Some banks could even extend the loan term to 20, depending, again, on your credit score or whether collateral is involved. Secured loans usually mean additional paperwork, but it could result in more flexible loan terms.

 

Secondly, you might also want to make sure that the model, make, and age (if not brand new) of the financing of an RV you’re buying fits your budget, the lifestyle you have in mind, the space you require, and the features that you want. Is it the size you want? Does it have the features that you need for the kind of RVing you are planning to do? Is it in a condition that will enable you to use it without glitches? Some would advise that you don’t need to have a specific RV in mind until you have an approved loan.

Without careful planning, you may end up deciding in a rush and choose an RV haphazardly, ending up regretful because the RV you got is not the RV that you need.

 

Third, before signing a loan agreement, see to it that you have already considered all available options. Perform a cost-benefit analysis for each option. Fourth, you should also know your rights and duties so that you will not run into problems later on. Both parties, you and the lender have responsibilities and you have to make sure that both parties adhere to said responsibilities stipulated in your contract. Laws differ from each state, so you need to see to it that your loan agreement is in accordance with the governing laws. Fifth, seek expert advice if necessary.

If, after studying your contract you still find a lot of gray areas, seek advice from someone who knows the ins and out of financing an RV. It’s the smartest thing to do and saves you a lot of time and money you might be cashing out when you make the wrong decision.

 

Again, before signing that loan contract, make sure to:

  •       Understand the details of the loan agreement
  •       Choose the right RV for your budget and specific requirements
  •       Compare other available options
  •       Know your rights and responsibilities
  •       Seek expert advice

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What is the Maximum Length of an RV Loan?

Different factors come into play for the length of an RV loan that you might be approved for. Depending on your credit score, on average, banks allow 10-15 years but may extend up to 20 years on certain conditions. With a good credit score, or, if you have qualified collateral, you might be approved to get a loan of $50,000.00 or more. Understand, however, that although the amount you need to pay monthly would be lower, the effective interest increases with the length of the loan repayment term.

Sometimes, we focus too much on longer repayment periods to lower the monthly payment without realizing that it also means paying a larger amount in the end if you sum up the interest incurred over time.

That is quite a decision and totally depends on your financial standing. If your monthly income warrants a shorter repayment period would save you more money. If not, set a budget. What is the maximum that you could set aside every month for your financing an RV loan amortization? You can use this to decide how long you can finance an RV.

Another factor that will come into play in these calculations is the amount you put as a downpayment. With a bigger downpayment, you can reduce the monthly amortization and the effective interest rate and lengthen the repayment period. Saving up a considerable amount for a downpayment will be beneficial.

 

Should you choose a brand-new RV or a used one?

Brand-new RVThis is also another important consideration. Definitely, a brand-new RV would save you from maintenance woes, but they are, of course, more expensive. Well, if you are ready to shell out that much for your RV, then good for you. But if you are on a tighter budget, you can go for a used one. The arrangements are usually different for brand-new and used RVs. For brand-new financing  an RV, you would usually transact directly with a dealership.

Dealerships usually have a preferred lender or bank – most often, these institutions offer better rates and repayment arrangements. Meanwhile, for used RVs, you usually deal directly with the previous owner or with companies that sell used RVs. Used RVs are usually cheaper, especially older ones.

You have to be careful, though, as the amount that you thought you have saved by choosing a cheaper one would actually be spent on repairs. Sometimes, buyers of handed-down RVs spend more on repairs and maintenance costs. What you can do to avoid this is to have the unit checked by a reliable mechanic before signing any contract. What should you be looking for? Of course, the engine should be in good running condition. Make sure to have the air-conditioning checked.

It is also important to have the plumbing system and the toilet checked. Usually, with defects pointed out, you can re-negotiate the price, just be prepared to spend a few extra bucks for the repair of said defects. Sometimes, it’s a matter of luck to end up with a cheap used financing an RV in excellent condition.

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Can You Use an Auto Loan to Purchase an RV?

Purchase an RVBecause RVs, especially brand-new ones, are usually more expensive than a car, you would need to make a larger loan. Larger loans usually necessitate a more rigorous underwriting process. Lenders would usually require a stronger credit score and a solid income source to vouch for your capacity to repay the loan.

If your credit score is not in a good shape, it might be harder for you to get financing an RV loan. So, if you cannot use an auto loan to buy an RV, what other options do you have? Securing your loan with collateral may give you the chance to be granted an RV loan. In fact, banks would require collateral for larger loans.

This means, defaulting on your loan could mean repossession of your financing and RV. Since secured loans are less riskier for the bank, they usually come with a lower interest rate. Other banks would also accept titles of your other properties as collateral. These could be sequestered by the bank should you fail to repay your loan.

Before making this decision, though, you need to calculate whether this is a practical decision or not. Or else, you will end up owing so much more than the actual value of your financing an RV. Like, if you thinking of reselling your financing an RV in the future, you might not be able to recover the amount you spent acquiring it or, at least a practical portion of it. So, before signing any contract, review the tips stated above and tailor your plans to your financial capability.

 

Financing an RV: Conclusion

Entering a loan contract for financing an RV may not be as easy as getting an auto loan but there are workaround solutions and tips that you can follow so that you can acquire the RV that you have been wanting to have. Truly, flexibility and freedom come with a cost.

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