The high price of an RV means that owners rely heavily on financing. Lenders include online and traditional banks, credit unions, and recreational vehicle dealers. Here is what you should keep in mind about recreational vehicle loans.
The loan terms are longer. Some RV loans rival home mortgages, with repayment periods ranging from 10 to 20 years for amounts that can sometimes exceed $ 500,000. Aim for a loan with the shortest possible term you can manage.
Lenders are more stringent. The more you need to borrow, the more a lender will demand of you, says Gary Ocallaghan, chief financial officer at Gerzeny’s RV World, a dealership with four locations in Florida. “Once you get past the $ 150,000 mark, you’ll need to provide additional documentation,” he says, including credit information, tax returns, and personal financial statements. The buyer’s debt-to-income ratio, including the expected RV loan payment, must be less than 50%, he adds.
The down payments are more important. Most lenders require a minimum down payment of 10% of the sale price, Ocallaghan says.
Credit scores are higher. A good credit score for a car loan is usually 660 or better, but the bar is higher for recreational vehicles. You’ll need a credit score of at least 700, says Ocallaghan. “If your score is below 700, it is difficult to get approval.” Although his company works with many lenders, Ocallaghan knows of only two who would approve RV financing for borrowers with a credit score below 700.
The motorhome often serves as a guarantee. Most RV lenders will only consider a secured loan that uses the RV as collateral. Secured loans are easier to obtain, charge lower interest rates, and have higher borrowing amounts than unsecured loans, which lenders see as riskier. Interest rates on secured loans recently ranged from 4.2% to almost 8% at various banks and credit unions, depending on the amount borrowed and the length of the loan.
Older recreational vehicles are more difficult to finance. Typically, lenders do not finance recreational vehicles older than 15 years. If you are buying an older RV, you may want to consider an unsecured personal loan. Lenders may also require an RV inspection, which ranges from $ 150 to $ 1,200 depending on the vehicle.