A recreational vehicle, also known as a camper or an RV, allows you to see the country, vacation comfortably, visit relatives or even establish a permanent residence. According to the RV Industry Association, around 11 million households in the United States own an RV.
If an RV is on your wishlist, your first step is figuring out financing. RV loans are available through online lenders, banks, credit unions and RV dealerships, and the process of acquiring one is similar to that of acquiring an auto loan.
What is an RV loan?
An RV loan finances the purchase of a new or used recreational vehicle. It is a type of long-term financing that you can use to purchase a motor home, travel trailer or camper. With the price of RVs ranging from less than $10,000 to $1 million or more, many RV buyers need to rely on some form of financing to help them make their purchases.
A number of lenders offer RV loans for both new and used recreational vehicles. You may be able to find RV financing through an online lender, a bank, a credit union or the RV dealership where you purchase the vehicle. Often, the RV itself will serve as collateral for the loan (like when you purchase a car). Because of this, you likely won’t need to put up any additional collateral to secure financing.
Most RV loans feature repayment terms that range between 10 and 15 years. However, some lenders and financial institutions may offer RV loans that stretch out as long as 20 years.
How does an RV loan work?
While an RV loan is typically a loan specific to the purchase (or refinance) of a recreational vehicle, it works much like any other consumer loan. In other words, a financial institution or lender provides the funds for the purchase, and you pay back the money, with interest, over a specified time frame. RV loans are secured loans, meaning they’ll be backed by collateral. This is typically the RV itself.
Once you’ve decided on a lender, you’ll complete an application and then, if approved, sign an agreement that outlines the terms for borrowing the money, such as the length of your loan and the interest rate.
Brian Sharapata, senior manager of credit product strategy for Alliant Credit Union, points out that the type of RV and trailer style can determine which lender is best for you — not all lenders will finance every type of RV. You’ll also need to let your lender know if you’re planning on using your RV as a primary residence.
What are typical RV loan terms?
Because of the high cost of many RVs, lenders typically offer longer terms for RV loans in order to keep the payments affordable. Some lenders offer terms as long as 240 months, or 20 years. However, it’s possible to find shorter terms. LightStream, for instance, offers terms ranging from 24 to 48 months. If you can afford the payments under these shorter terms, you’ll pay less in interest over the life of the loan.
What are the current interest rates for RV loans?
If you have excellent credit, current RV financing rates start around 4.29 percent. But if you have poor credit, such as a FICO score below 580, interest rates will likely be much higher. If your credit score is weak, consider saving for a larger down payment and working to improve your credit in the meantime.
Here’s a quick comparison of rates, terms and loan minimums from five banks that offer RV financing, as of Aug. 24, 2020:
|LightStream||4.29%–11.89% (with autopay)||24 to 84 months||$5,000|
|Navy Federal Credit Union||Starting at 8.09%||Up to 180 months||Not specified|
|U.S. Bank||Starting at 5.24% (with autopay)||Not specified||Not specified|
|USAA||Starting at 5.75% (with autopay)||12 to 180 months||$5,000|
|SunTrust Bank||4.99%–6.62% fixed, 4.25% variable||Up to 240 months||$58,301|
How to finance an RV in 6 steps
1. Set a budget
An RV is a significant purchase. On the low end, you can find a towable pop-up camper type for as low as $5,000. On the high end, RVs can cost more than $1 million. Before you start shopping, it’s important to figure out what you want in an RV, as well as what you can reasonably afford.
First, consider how large you really need your RV to be — a smaller RV 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. Consider mileage, safety, make and model, and drivability,” says Joe Pendergast, vice president of consumer lending at Navy Federal Credit Union. “Don’t forget to include any recurring costs, such as maintenance, fuel, storage and insurance into your budget.”
Repayment terms are also an important factor when developing your budget. On average, RV loan terms range from 10 to 15 or even 20 years. Make sure you’re comfortable with the monthly payment over the long term. A 10-year loan will have higher monthly payments, but you’ll pay off the loan more quickly. A 20-year loan, on the other hand, 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 involved in the cost of the vehicle than simply the sticker price.
2. Save a down payment
Most RV companies require at least 10 percent of the purchase price as a down payment, and many prefer 20 percent down.
A larger down payment will help lower your monthly payments, and you may even qualify for a loan with a lower interest rate. Current RV loan interest rates start around 4.29 percent and can range far higher depending on the condition of your credit and other factors.
“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.”
Takeaway: Be prepared to put at least 10 to 20 percent down on your 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 help you secure you the best rates.
“Before you plan to purchase, check your credit score and take any actions that you can to improve it,” says Sharapata. 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 it evaluates your loan application. Remember, you can claim a free copy of all three of your credit reports once every 12 months from AnnualCreditReport.com. (You are able to claim one free report per week from each credit agency until April 2021.)
Takeaway: The health of your credit score is a key factor in determining how much you pay for an RV, so be sure to research 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 prequalification and 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. Do your research to figure out which type of loan is best for you.
5. Compare different lenders
Before you secure any loan, it’s wise to compare offers from multiple lenders. You can consider banks, credit unions and online financing companies, or even the company that sold you your RV.
Shopping around for the best deal on financing might save you money every month. In fact, a little smart rate shopping could potentially 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 saves borrowers 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. And, some lenders will have a minimum loan amount that they will finance,” says James Barron, senior vice president of sales and business development at Bank of the West. “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 the loan on your RV purchase.
Just as you would when buying a car, be prepared to haggle. RV dealerships will expect it, and you could save yourself a good bit of money. In addition to dealerships, sites such as RVs.com, RVT.com and RVTrader.com can give you an idea of prices and deals.
Check these sites when doing your research. Also, 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 come to the negotiating table prepared by engaging in research ahead of time so you’re armed with knowledge about the competition and the prices being offered by other dealers.
How to qualify for the best RV loan rates
Your rate for RV financing might be higher than the rate you got for your car loan. RVs are considered luxury items, and lenders are more cautious about lending money for luxury items because they’re considered expendable in times of financial crisis. As such, you’ll likely have to provide your RV as collateral for the loan.
Check your credit score so you know what kind of rates you might expect to be offered from lenders. Lenders consider credit scores (generally FICO scores) to try to determine your level of credit risk. Lenders will also consider your debt-to-income ratio.
“Having five or more years of significant credit history, a variety of account types, excellent payment history, a proven ability to save, and stable and sufficient income are characteristics that contribute to applicants qualifying,” says Nelson.
Remember that you can use the internet to your advantage when you’re shopping for an RV loan. With some lending marketplaces, you can fill out a single application and potentially receive several offers from different lenders. This makes it easier to see which terms you qualify for and choose the best deal for your situation.
Whichever route you choose, the lender will want to know some basic information about the RV you intend to purchase. For example, you will need to provide the value of the RV, the age of the RV and the RV’s mileage. Buying a used RV can save you money upfront, but it will usually come with higher interest rates (and potentially higher maintenance costs in the long run).
Insurance for RV loans
Before you can buy an RV, you’ll need proof of insurance in order for most lenders to give you a loan. Be sure to talk to your insurance company and get enough coverage to meet the lender’s requirements. Keep in mind that the insurance will add to your monthly costs, so budget for that as well. Consider the best RV insurance companies when budgeting.
Buying an RV can be a life-changing experience. But it’s important to find an RV that’s right for you and an RV loan lender that’s reputable. Before submitting your application, pull quotes from a few different lenders and factor in all of the costs that will come with your purchase.
Can someone co-sign an RV loan?
Some lenders allow co-signers on large loans, such as RV loans. However, as with any other type of financing, whether or not you can apply for an RV loan with a joint applicant comes down to the individual lender’s guidelines.
Remember, if someone co-signs for an RV loan with you, they are equally liable for the debt. The account will almost certainly show up on both of your credit reports as well. If you don’t need a co-signer for financial reasons, it’s typically best to avoid joint credit applications whenever possible.
Are RV loans tax deductible?
RV loans are a little different than car loans, as you could declare your RV a primary or secondary residence, which might reduce your federal taxes.
“If the RV is used as the consumer’s principal residence, the interest is deductible just as with a residential mortgage,” says Barron. However, if you declare your RV as a residence, you might need special insurance. If you’re worried about tax implications, consult with a tax professional.
Can you buy an RV with an auto loan?
Most lenders will not allow you to purchase an RV with an auto loan. Lenders typically consider RVs, like boats and motorcycles, to be luxury items. As a result, the lender will want you to take out an appropriate loan (likely with a higher interest rate than you could secure on an auto loan) to purchase an RV.
What is a good credit score for an RV loan?
In order to qualify for an RV loan, you’ll generally need a credit score of at least 690 to 700, says Barron, though some lenders may offer loans to those with lower credit scores. If you’re having trouble qualifying on your own, adding a co-signer with good credit could help you secure the loan.