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Buying a recreational vehicle, also known as an RV, is a significant expense, one that ranges anywhere from $25,000 to $550,000 in most cases, but some of the most luxurious models can cost $1 million or more. Many people turn to RV loans to help finance such a large purchase.
Available through online lenders, banks, credit unions and even some RV dealerships, the application process for an RV loan is similar to an auto loan application. However, RV loans provide larger amounts of cash than typical auto loans, and the qualification requirements are often slightly more complex.
What you need to qualify for an RV loan
Because RVs are considered luxury items and involve lending a significant amount of money, the qualifications for RV loans are generally stringent, often similar to qualifying for a mortgage.
“To qualify for an RV loan, a borrower generally needs a continuous source of income and good credit history–typically including evidence of satisfactory repayment of a similar size and type of debt,” says Michael Lax, executive vice president and head of RV marine sales for Bank of the West.
As with applying for any type of consumer borrowing, a solid FICO credit score is an important part of your qualifications. Lenders use credit scores to gauge your level of credit risk or likelihood of repaying the loan. Credit scores in the mid-700s or higher typically secure the best rates.
“Most lenders require a FICO score of 680 and above. However, some specialty lenders will allow FICO scores below 680,” Lax says.
Before starting your application, check your credit reports with all three credit bureaus — Experian, Equifax and TransUnion — so that you know your score in advance. That way, you can take any steps needed to improve it. A free copy of your credit report from all three bureaus is available once every 12 months from AnnualCreditReport.com.
When applying for an RV loan you’ll need proof of sufficient income to repay the monthly loan payments, along with your other existing debt, says Scott Greene, head of marine and RV lending for Truist.
“Consumers also need to understand the additional RV expenses that are outside of the monthly RV loan payment,” Greene says. “For example, additional fuel costs, physical damage insurance and storage expenses – if not at the home.”
While the ability to pay these additional costs is not part of a lender’s considerations during the application review process, it’s important to understand the full scope of expenses when considering whether you can afford an RV.
Use the Bankrate personal loan calculator to help determine how much you can reasonably afford.
While credit history requirements may vary by lender, having a solid track record of borrowing and responsibly repaying your debts is important.
Lightstream, for instance, not only looks for several years of credit history, but also credit history with various account types. This can include major credit cards, installment debt and mortgage debt, if applicable. Good payment history with few delinquencies or challenges in repaying debt is also important.
Additional application requirements typically vary by lender and are lender-specific. Because RV loan applications tend to be more stringent, some lenders require tax returns, financial statements and detailed credit history.
“Some lenders may require proof of income, proof of assets, proof of residency, or how the RV will be utilized,” Greene says.
How do RV loans work?
RV loans have aspects that are similar to both car loans and home mortgages. For this type of installment loan, you’ll make a set monthly payment, with different amounts allocated towards the principal and interest.
Like a mortgage, RV loans are long-term financing with terms that can go as long as 15 years. However, some lenders may extend the term to 20 years. And, also like a mortgage, you may need to provide more financial documentation to apply.
An RV loan will be secured – like and auto loan – with the RV serving as collateral in case you default on the loan. However, unlike a car loan, you will most likely need to make a down payment, typically between 10 to 20 percent of the purchase price.
What you need to know before getting an RV loan
Before applying for an RV loan, you’ll need to know how much money you want to borrow and generally need to have identified the RV you are seeking to purchase, says Greene.
- Before applying for an RV loan, you’ll want to do your homework. This includes:
- Check your credit score — if it’s low, work on building it up before submitting a loan application.
- Identify the RV you want to purchase — your lender needs to know the amount you want to borrow.
- Secure the funds for your down payment — this is typically 10 to 20 percent of the purchase price.
- Compare lenders — look at interest rates and terms and develop a list of potential lenders.
How to apply for an RV loan
There are several steps involved in the application process for an RV loan.
1. Obtain quotes from multiple lenders
Before submitting a full application, obtain quotes from the lenders you already compared. “If you are purchasing from a dealer, it’s best to work with the dealer who has access to several lenders and can match you with the right lender for your specific circumstances,” Lax says.
Taking this step will allow you to find out how much funding you may be approved for in advance of shopping for your RV.
2. Complete an application
Once you’ve settled on the lender you hope to work with, complete and submit your full application. Depending on the lender, the application will have different requirements. Typically you’ll need to provide:
- Your full name and date of birth.
- Your address and phone number.
- Your Social Security number.
- Information about your employer.
- Income documentation, such as a W-2.
3. Sign loan agreement
Once you’ve found the RV you want to purchase and have been approved for the loan, sign the loan agreement, which outlines the loan terms. Depending on the lender, the funds may be deposited into your account as soon as the next day.
Whether you’re buying a new or used RV, there are many lenders that offer financing. But getting approved can be as complex as applying for a home mortgage. To help improve your odds of approval, determine in advance exactly how much you need to borrow and that you have the income and credit score to support a successful application. It’s also a good idea to shop around and get quotes from multiple lenders to find the best deal for your needs.