Maybe you’re a devotee of the #RemoteWorkLife or have been inspired by perfectly curated #VanLife videos. Maybe you’re ready to fulfill your dream of a cross-country road trip with your “hotel” traveling with you from town to town. Whichever hashtag (or fantasy) is motivating you, you’re ready to experience the freedom of the outdoors on wheels.
An RV (recreational vehicle) can help you achieve either of those goals (and many more). If you’re serious about buying an RV, otherwise known as a camper, do you know how you’re going to pay for it?
We can help you get your financing options in gear, walking you through the process and answering all your RV loan questions. Let’s get the show on the road!
What Is an RV Loan and How Does It Work?
An RV loan helps you pay for your RV. When you use a loan to finance a big purchase, you don’t need to pay the entire cost out of pocket.
So how much does an RV cost? The sticker prices on RVs are … well, all over the place. You may find a used trailer-style RV for under $10,000. But a souped-up palace-on-wheels can set you back north of $300,000. High-end, custom “glamping” RVs can go for $1 million or more.
An RV loan is typically an installment loan with a fixed interest rate. You borrow a lump sum of money to purchase the RV and pay back what you owe in fixed monthly payments. Your payments and the length of your loan will mostly depend on the cost of the RV and the amount of money you’re borrowing.
An RV loan is not an auto loan
RV loans and auto loans are not the same things. RV loans typically have different qualifications and terms (we’ll get to these in a sec) than car loans because they are typically larger loans. You know those 0% intro APR (annual percentage rate) deals lenders offer on cars? Well, that’s rare for RV loans. And their interest rates are usually higher than the rates for car loans.
Where to find an RV loan
RV dealerships and companies often partner with lenders to finance customer purchases. But banks, credit unions and online lenders offer RV loans as well.
What Are the Typical RV Loan Terms?
RV loan terms will vary by lender, the type of loan (secured or unsecured), the RV’s age (new or used), the prime interest rate, how much you’re borrowing and your credit. With so many variables on the line, a loan’s terms will be unique to each borrower, but, in general, RV loan terms follow this pattern:
The amount a would-be RV buyer will need to borrow can range from $10,000 (or less) to over $1 million.
Secured loans require collateral. With secured RV loans, the RV is the collateral. For borrowers with excellent credit, interest rates for a secured RV loan typically start around 5.0% APR.
Unsecured RV loans don’t require collateral. Because no collateral is involved, unsecured RV loans typically have higher interest rates that range from 6% – 17% or higher.
The typical RV loan term ranges from 1 – 15 years, though some lenders offer terms of 20 years or longer if the RV is at the pricer end of the scale. With a longer loan term, you’ll pay more in interest than you would with a shorter loan term – but your monthly payments would be lower.
As soon as they’re driven, RVs can decrease in value by as much as 20%. It’s easy to go “underwater” on your loan, which is owing more than the RV is worth.
How Do You Qualify for an RV Loan?
You should compare RV loans before you shop for an RV. This way, you’ll know how much you’re qualified to borrow – and what kind of RV you can afford.
Like most loans, qualifying for an RV loan will depend on how much you’re financing and your financial situation. But in general, here’s what you’ll need to qualify for an RV loan:
- Down payment: You’ll probably need to put down at least 10%. Some lenders may require a minimum of 20%.
- Credit score: Lenders generally prefer a credit score of at least 700 for an RV loan but may consider a score of 680. Some lenders offer RV loan options for borrowers with low credit scores. But you’ll probably have to make a heftier down payment and accept a higher interest rate if you’re working with a lower-range credit score.
- Credit history, income and assets: Lenders will review your credit history, your income and your financial documents, like tax returns, pay stubs and bank statements, to determine your creditworthiness. Lenders need to determine your ability to repay a loan.
What Should I Do Before Getting an RV Loan?
Before you contact a lender about an RV loan, ask yourself these questions:
How will I use my RV?
Will you be driving your RV across thousands of miles of highway and back roads? Or will you drive it to a campsite three hours away and keep it parked there all summer? Your plans for the RV will help you determine which RV features are most important to consider.
Who will be using the RV with me?
Will you be traveling with your family of five or traveling solo? The size of your camper will depend a lot on how many people need to travel and sleep in it. Of course, the bigger the camper, the higher the cost.
What is my budget?
It’s important to know what RV and RV loan makes the most financial sense for you. Choose a loan with a monthly payment you can comfortably afford. That also means deciding between a shorter or longer loan term.
Here’s what that decision would like with a $70,000 RV:
You shopped around and found a $70,000 RV you love and know you’ll travel in for years to come. You decide to make a $25,000 down payment, leaving you $45,000 to finance.
Your lender checks your credit score, credit history and financial information and offers you a 6% fixed APR.
With a 10-year term, your monthly payment will be $499.59. Your total payments will come to $59,951.07, and the total interest paid will be $14,951.07.
With a 5-year term, your monthly payment will be $869.98. After 5 years, your payments will total $52,198.56, and the total interest paid will be $7,198.56. That’s less than half the amount of interest you’d pay if you went with a 10-year loan.
Alternatives to RV Loans
There is more than one way to finance an RV purchase. Like most loans, your ability to qualify for these options will depend on how much money you need to borrow and your creditworthiness:
An unsecured personal loan
Unsecured personal loans typically have lower borrowing limits. Because they are unsecured and don’t require collateral, their interest rates will be higher than they would be for secured loans. In the first quarter of 2022, the average interest rates for unsecured personal loans were between 8.77% and 9.85%.
A home equity loan
A home equity loan is secured by the equity in your home. Your home is the loan’s collateral. Because the loan is backed by an asset, the interest rate will likely be lower than it would be for an unsecured loan.
Getting on the Open Road
Ready to get on the open road? Do your homework first. Decide which RV you need and which financing options work best with your budget. Enjoy the great outdoors (and take plenty of pics!).
National Credit Union Administration. “Credit Union and Bank Rates 2022 Q1.” Retrieved June 2022 from https://www.ncua.gov/analysis/cuso-economic-data/credit-union-bank-rates/credit-union-and-bank-rates-2022-q1