A recreational vehicle, also known as a camper or 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 wish list, the first step is figuring out how to finance the purchase. 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 is a type of long-term financing used to purchase a motorhome, travel trailer or camper. The cost of an RV can range from as little as $10,000 to more than $1 million, so most RV buyers rely on some form of financing.
Many 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 purchased the vehicle. Usually, the RV itself will serve as collateral for the loan, just like when you purchase a car. Because of this, you likely won’t need to put up any extra collateral to secure financing.
Most RV loans feature repayment terms that range between one and 15 years. However, some lenders and financial institutions may offer RV loans that stretch as long as 20 years.
How does an RV loan work?
While an RV loan is typically specific to the purchase or refinance of a recreational vehicle, it works like any other consumer loan. 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’re backed by collateral — usually the RV itself.
Once you’ve decided on a lender, you’ll complete an application and, if approved, sign an agreement outlining the terms of the loan.
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, as 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 RVs are more expensive than regular cars and trucks, lenders typically offer longer terms for RV loans than auto loans.
Some lenders offer terms as long as 240 months, or 20 years. However, borrowers who can afford higher payments can find shorter terms.
For example, LightStream offers terms ranging from 24 to 84 months, while USAA offers terms as short as 12 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 interest rates start around 4.29 percent. If you have poor credit, which means having a FICO score below 580, your interest rate will likely be much higher. In this case, 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 four banks that offer RV financing, as of Feb. 16, 2021:
|LightStream||4.29%–11.89% (with autopay)||24 to 84 months||$5,000|
|Navy Federal Credit Union||7.99%–8.8%||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||4.74%–5.74%||Up to 240 months||$100,000|
How to finance an RV in 6 steps
If you’re ready to buy an RV, set yourself up for success by taking these steps first.
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. 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 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 into your budget, such as maintenance, fuel, storage and insurance.”
Repayment terms are also an important factor 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 off the loan 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 involved in the cost of the vehicle than simply 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 can extend higher, depending on 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 secure the best rates.
“Before you plan to purchase, check your credit score and take any actions 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 evaluating your loan application.
Remember, 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 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 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 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 the loan on your RV purchase.
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 RVs.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.
How to qualify for the best RV loan rates
Your rate for RV financing might be higher than the rate you get for a car loan. RVs are considered luxury items, and lenders are more cautious about lending money for luxury items because they’re considered expendable during a financial crisis. This is another reason why financing an RV is more expensive than financing another kind of vehicle. You’ll also likely have to provide your RV as collateral for the loan.
Check your credit score to see what kind of rates you might receive from lenders. Lenders use credit scores (generally FICO scores) to determine your level of credit risk. They will also consider your debt-to-income ratio, which reflects your monthly debt payments divided by your monthly gross income.
“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.
If you want a variety of quotes, use lending marketplaces that let you fill out one application to get offers from several 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, age and mileage of the RV. Buying a used camper 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
In order to get a loan from most lenders, you’ll need proof of insurance. 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 comparing rates.
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, pull quotes from a few reputable lenders and factor in all of the costs that will come with your purchase.
Frequently asked questions about RV loans
Can someone co-sign an RV loan?
Some lenders allow co-signers on large loans, including 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 on an RV loan with you, they are equally liable for the debt. The account will almost always show up on their credit reports and could affect their ability to qualify for another loan. If you don’t need a co-signer for financial reasons, it’s typically best to avoid joint credit applications.
Are RV loans tax deductible?
RV loans are a little different than car loans, as you can declare your RV a primary or secondary residence. This can 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 RV 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 a motorhome with a standard auto loan. Lenders typically consider RVs luxury items, like boats and motorcycles, while cars are a necessity. As a result, the lender will want you to take out a different loan to purchase an RV, likely with a higher interest rate than you could secure on an auto loan.
What is a good credit score for an RV loan?
To qualify for an RV loan, you’ll generally need a credit score of at least 690 to 700, says Barron. There are a few lenders that offer RV 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.
What costs are associated with an RV?
As with car or truck owners, motorhome owners need to factor in the cost of repairs, regular maintenance, insurance and gas. If you don’t have space to store the RV at your house, you’ll also have to pay a monthly storage fee.
Should I buy or rent an RV?
Renting an RV usually costs between $100 and $200 a night, depending on the type of RV and how long you’re renting it for. If you only want to use it once a year, renting may be the more cost-effective option. But if you dream of taking road trips twice a month, buying one probably makes more sense.
For undecided consumers, renting an RV or camper before you buy one can help you decide if it’s worth purchasing.
How do I get a lower interest rate on my RV loan?
There are several strategies you can employ to be approved for a lower interest rate, like providing a larger down payment. Improving your credit score can also help, as can decreasing your debt-to-income ratio. Comparing quotes from different lenders can also help you spot the best deal.