Buying a recreational vehicle, also known as a camper or an RV, will allow you to see the country, vacation comfortably or visit relatives and friends. For many families, an RV serves as their permanent residence. According to the RV Industry Association, around 11 million households in the United States own an RV.
If a new RV is on your wish list, your first step is figuring out camper financing. An RV is probably the second most expensive purchase you’ll ever make, after your home, so it’s important to understand the ins and outs of this type of financing before you start shopping for your new recreational vehicle.
What is an RV loan?
An RV loan is a type of long-term financing that you can use to purchase a motorhome, travel trailer or camper. With the price of RVs ranging from less than $10,000 to $500,000 or more for some of the largest motorhomes, 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.
If you have excellent credit, current RV financing rates start around 4.25 percent. If you have poor credit, such as a FICO score below 580, you might get approved for an RV loan, but the rates you find could be as high as 24 percent. 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 May 13, 2020:
|LightStream||4.29% – 11.89%||24 – 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%||Not specified||$25,000|
|USAA||Starting at 5.75%||12 – 180 months||$5,000|
|SunTrust Bank||4.25% variable, 4.99% – 6.62% fixed||Up to 240 months||$58,301|
How to finance an RV
In order to ensure a smooth purchase and secure a good rate, there are a few things you can prepare before applying for a loan.
1. Set a budget
An RV is a significant purchase. At the low end, you can find a towable pop-up camper type for as low as $5,000. At the high end, RVs can cost as much as $500,000 or more. Before you start shopping, it’s important to figure out what you want and 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.
Repayment terms are also an important factor. On average, RV loan terms range from 10 to 15 or even 20 years. Make sure you are 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.
In addition to the monthly payments from an RV loan, you should also budget for:
- Gas and maintenance costs.
- Utility costs (water, cable, electric).
- Camping and storage fees.
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 range from around 4 percent to 25 percent, depending on the condition of your credit and other factors.
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.
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.)
4. Decide which type of loan you want
Consider whether you want a secured vehicle loan or 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.
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.
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.
How to qualify
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.
Often, lenders will want you to provide collateral in case you default on the loan. As with auto loans, your RV itself will likely be able to serve as collateral.
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.
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.
You can also research credit unions, banks and online lenders. If none of these options appeal to you, the RV dealership will likely have financing you can consider as well.
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).
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.
Can someone co-sign an RV loan?
Many lenders will 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 to secure the loan, the mortgage interest could be deducted from your taxes as a homeowner. However, if you declare your RV as a residence, you might need special insurance.
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.
The bottom line
Buying an RV can be a life-changing experience. Once you find the RV that’s right for you, finding a reputable lender to help finance your purchase is an important step. Make sure to do your research and pull quotes from a few different lenders before applying for an RV loan.