RV Financing – Length Of Loan And How To Avoid Mistakes

What is an RV Loan?

Like auto loans, an RV loan is a way to finance a recreational vehicle over several years. Generally issued by lending institutions like banks and credit unions, some private RV related businesses also offer financing, especially their products. And many dealerships tout “We’ll finance you!” but their actual loans come from banks within their network. But, because some RVs have prices comparable to homes, there are a few differences between loans on them and financing automobiles. So we’ve broken down the RV loan process here to show you what to expect.

How Does an RV Loan Work?

Most loans made on motorhomes and travel trailers start with the price of the vehicle being purchased. Just like any car or truck loan, commercial institutions need to know what their money will be used for and how trustworthy you are in paying that money back to them.

So you will be required to show them proof of income, as well as telling them about the RV you’d like to purchase.

If a loan is made, there will be a determination of the number of monthly payments.

Also, based on the percentage rate they charge on their money, the amount required from you as a down payment.

Additionally will be your credit-worthiness. The monthly payment will also be determined by the length of the loan, which can be negotiated. Once you sign on the dotted line, the bank will process the payment to the RV dealership.

If you are purchasing from a private seller, you will receive a check from the bank to buy the RV directly from its previous owner. Your payments on that loan usually begin within 45 days after its creation.

What Are Typical RV Loan Term Lengths?

One of the most significant differences between an auto loan and one for an RV is the length of the loan.

Because many recreational vehicles cost much more than a car or truck, financing can sometimes be stretched out over more years. So how long can you finance an RV?

The most common timeframe for RV loans to be paid back falls between five and ten years. However, with typical prices between $100,000 and $250,000 on newer vehicles, many find they can finance their payments up to 20 years.

There are a few stipulations, though. Most have to do with the vehicle’s age. It is virtually impossible to find long-term financing for RVs over ten years old. In those cases, buyers may be limited to five years or less to stretch out their loan. Most likely, the down payment required will be 20%.

What Factors Contribute to Your RV Loan Term?

Size of Loan

If your loan amount is under $25,000, most loan lengths will be 5 to 7 years. Loans of $50,000 may be financed for ten years or less, with some exceptions.

Over $50,000 purchase prices usually can garner 10 to 15 years’ loan length. Over $100,000 may allow payments over 20 years’ span.

As with any transaction, there are differences between lending institutions. None of these rules is written in stone, so check with your specific bank regarding its specific requirements.

Type of RV

Most financial institutions treat motorized RVs and trailers the same when considering loan length, but more experimental-type vehicles may give them pause.

Age of RV 

Because RVs depreciate as they grow older, credit unions and banks are less willing to loan money over more extended periods on vehicles over ten years old. Most of those loan lengths are for five years or less.

Credit Score 

If a bank is loaning you money, they want to know that you have a payment history that shows you are dependable and consistent. Your credit score and history are of great importance to them.

How to Finance an RV in 6 Steps

Set a Budget

Decide how much money you can afford to pay out each month on a loan payment. A great idea would be to start saving that amount each month before you even get the financing, as it will show you that you can afford it AND it will help you build up your down payment.

Save a Down Payment

Start putting money away now to use as a down payment when it comes to getting a loan. This will lessen the amount of money you will have to borrow (and payback), and it might give you a cushion when you begin shopping for that RV.

Check Your Credit Score

If you have a poor credit history, start working to improve it by making timely payments and paying off as much debt as possible before applying for an RV loan. Depending upon your situation, this could take years, so begin the process of improvement now.

Decide What Length of Loan You Want

This will also help you determine how much your monthly payment will be. Keep in mind that you may have to negotiate that timeframe with your lender. (Some loan lengths are non-negotiable, especially on older RVs.)

Compare Different Lenders

Just as you would when buying a car, price shop your lenders. Credit unions have better terms (lower interest rates, lower down payment requirements, etc.) and shop online for lenders. They don’t have to be local to finance your new RV!

Many competitive banks across the country specialize in RV loans, so compare their rates. Good Sam is another option for RV loans.

Negotiate

When you find the vehicle you want to buy, don’t take the sticker price offered as your only option. It is not unusual for new vehicles to get 15% to 25% off the MSRP, so negotiate with your salesman.

After all, this is a significant financial purchase that you will be making, so get the best deal you can!

Final Thoughts

As you can see, financing an RV is not any more difficult than borrowing money on a car. There are a few more considerations, but the process is pretty straightforward. And you are sure to find it is well worth it when you become the new owner of a recreational vehicle that can take you on fantastic journeys into the future.