How to finance
a recreational vehicle |
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Bankrate.com lists national
averages for new car loans as well as rates available in local
markets around the country.
The rate on an individual's RV loan is determined
by the finance amount, length of loan and a person's credit quality.
At Essex Credit, interest rates on RV loans range from 6.37 percent
to 10.25 percent.
"Not everybody is going to qualify for the
best rate," Barron says. "You should do some homework. First know
your own credit profile. Then compare what's available in the market."
Lightening the load
A big down payment will not necessarily help drive down the interest
rate on a loan. Most lenders require less than a 20 percent down
payment and many lenders require a down payment of less than 10
percent. There are even some zero-down loans.
"Lenders prefer to have larger loans on their
books. So you may actually pay a higher interest rate for a small
loan," explains Barron.
Most RV loans are
simple interest rate loans. With a simple interest rate loan, the
amount of each payment that is allocated for interest is determined
by the loan's unpaid principal balance, the loan's interest rate
and the number of days since the last payment. The rest of the payment
goes to a loan's principal.
Many RV lenders offer automatic bill pay. With
automatic bill pay, a loan payment is automatically deducted from
a bank or credit union account on a certain day of the month.
If you're an individual that might be traveling
a lot in an RV, that might be convenient.
Terms on RV loans typically average 10 years
but can go longer. For larger loans, say $50,000 to $100,000 or
more, many lenders will allow you to extend the loan term to 20
years.
RV owners are known for making steady, on-time
loan payments year after year.
"Historically, RV loans have an extremely low
delinquency rate nationwide. Generally, it's under 2 percent," Mason
says. "The people who purchase these vehicles tend to be very reliable
on loan payments."
You deserve a break
For most RV owners the interest on their loan is tax-deductible
as second-home mortgage interest.
To qualify, the RV must be used as security
for the loan and it must have basic sleeping, toilet and cooking
facilities. Almost all RVs, from motor homes to van and truck campers
to travel trailers, come with these facilities.
For more information on the tax deductibility
of RV loan interest, contact the Internal Revenue Service. Copies
of "Publication
936 -- Home Interest Deduction" and "Publication
523 -- Selling Your Home" are available by calling 1-800-829-3676
or by visiting the IRS Web site.
Once the research, number crunching and paperwork
are done, RV owners can get down to the fun part.
"Enjoy your dream and your vacation," Scalf
says. "You can get these little things taken care of."
Bankrate editorial assistant
Sheyna Steiner contributed to this story.
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