Many types of recreational vehicles, also known as RVs or campers, can serve as a home as well as a vehicle. RVs can be pricey, even costing as much as $1 million for top-of-the-line models. That is why many lenders offer RV loans to finance these big purchases.
RV loans are available through online lenders, banks, credit unions and RV dealerships. While the process of getting an RV loan is similar to that of getting an auto loan, lenders offer longer loan terms. Loan qualification might also be more complex, like getting a mortgage.
Once you secure financing for your RV purchase, you could be on your way to seeing the country, vacationing comfortably, visiting relatives or even establishing a permanent residence.
If you’re ready to buy an RV, set yourself up for success by taking these steps.
1. Set a budget
On the low end, you can find a towable pop-up camper type for as low as $5,000. High-end RVs can cost more than $1 million. Before you start shopping, figure out what you want in an RV and what you can reasonably afford.
First, consider how large you need the RV to be — a small camper is less expensive and easier to park, but it may not be the right choice if you have a large family.
“Beyond the sticker price, you’ll also want to ask yourself how often you plan on using your RV and where you plan on taking it,” says Joe Pendergast, vice president of consumer lending at Navy Federal Credit Union. “Consider mileage, safety, make, model and drivability. Don’t forget to include any recurring costs in your budget, such as maintenance, fuel, storage and insurance.”
Repayment terms are also important when developing your budget. On average, RV loan terms range from one to 20 years. Make sure you’re comfortable with the monthly payments before you sign up. A 10-year loan will have higher monthly payments, but you’ll pay the loan off faster. A 20-year loan is more affordable on a month-to-month basis but will ultimately cost more in interest.
Takeaway: When creating your RV budget, remember that there’s far more to the cost of the vehicle than the sticker price.
2. Save a down payment
Most RV companies require a down payment of at least 10 percent of the purchase price, and many prefer 20 percent down.
A larger down payment will help lower your monthly payments, and you may even qualify for a lower interest rate. Current RV loan interest rates start around 4.29 percent, and the rate you get depends on your credit and other factors. The current average interest rate on an RV loan is 6.17 percent for a new RV with a 36-month loan term.
“If you have enough in savings but don’t want to spend it all at once, you might consider putting a portion of the expense on a credit card,” says Todd Nelson, senior vice president of strategic partnerships at LightStream. “However, be cautious of high interest rates and hidden fees if you are unable to pay off the balance in a timely manner.”
Takeaways: Be prepared to put at least 10 percent to 20 percent down on your RV purchase.
3. Check your credit score
You’ll need a high credit score to qualify for an RV loan with low-interest rates. A credit score in the mid-700s or higher will likely secure the best rates.
“Before you plan to purchase, check your credit score and take any actions you can to improve it,” Sharapata says. He adds that you can always add a co-signer if their score will help you qualify for a lower rate.
It’s wise to check your credit reports with Experian, TransUnion and Equifax, as you typically won’t know in advance which report a lender will use when evaluating your loan application.
You can claim a free copy of all three credit reports once every 12 months from AnnualCreditReport.com. You may claim one free report per week from each credit agency until April 2022.
Takeaway: Your credit score is a key factor in determining how much you pay for an RV, so know your score in advance and do what you can to improve it.
4. Decide which type of loan you want
Consider whether you want a secured vehicle loan or an unsecured personal loan. Both have their benefits:
- Unsecured personal loans can offer fast funding, and you won’t risk having your RV repossessed if you fall behind on payments.
- Secured vehicle loans tend to have lower rates and may be easier to acquire if you have below-average credit.
You can use the Bankrate personal loan calculator to help you figure out what you can afford for a personal loan.
Takeaway: You don’t have to lock yourself into a traditional RV loan to finance your vehicle. It helps to research which type of loan is best for you.
5. Compare lenders
Before you choose a loan, it’s wise to compare offers from multiple lenders. You can apply with banks, credit unions and online financing companies, or even the company you bought the RV from.
Shopping around for the best deal on financing might save you thousands of dollars over the life of your loan.
With mortgage loans, for example, a Freddie Mac study found that getting five rate quotes helps borrowers save an average of $3,000 over the life of the loan. The savings potential on an RV loan could be just as significant.
The terms of the loan may also vary significantly from lender to lender.
“Consumers should know that some lenders restrict the maximum term of their RV loans,” says James Barron, former senior vice president of sales and business development at Bank of the West. “And, some lenders will have a minimum loan amount that they will finance. Lenders may also restrict the type of RV loan, based on use. For example, a lender may view a horse trailer with living quarters differently than an RV used as a full-time residence.”
Takeaway: Doing your research and shopping around for the best loan terms can save you thousands over the life of an RV loan.
Just as you would negotiate when buying a car, be prepared to haggle with your RV dealer. RV dealerships will expect it, and you could save yourself a nice chunk of money. Research prices on sites like RV.com, RVT.com and RVTrader.com to get a handle on the current market.
If you’re considering dealership financing, don’t be afraid to ask if a better deal is available on the loan side of the transaction as well.
Takeaway: Don’t be shy about asking for the price you want, and do your research ahead of time so you know what other dealers are charging.
It’s important to find an RV that’s right for you, but it’s equally important to find the right RV loan lender. Before submitting your application, get quotes from a few reputable lenders and factor in all of the costs that will come with your purchase.