While many consumers dream of owning an RV, very few have checking accounts that allow them to pay in cash. As a result, many turn to RV financing to fund their purchase.
Extending the length of the loan can be a great way to keep your monthly payment as low as possible. But how long can you finance an RV?
Today, we’ll answer this question and provide some essential tips to consider when purchasing.
Let’s go!
Like homes, automobiles, and other large purchases, most consumers rely on financing to purchase an RV. This allows the purchaser to spread out the costs associated with the transaction over an extended amount of time. For RVs, this is typically anywhere between five and 20 years.
Despite this, financial institutions are businesses that don’t offer this service or assume the risks for no reason. They charge borrowers interest on the money they borrow. Depending on the amount borrowed, length of the loan, and interest rate, this can mean tens of thousands of dollars for the lender. It’s a small price to pay over a long time to make your dream come true.
Yes, it can be very challenging to qualify for RV financing. Lenders typically see these types of purchases as luxuries. As a result, they’ll generally have much stricter rules and requirements for applicants looking to borrow money.
If you plan to apply for RV financing, you’ll want to ensure you have finances in order. This includes a credit score of at least 680, a job, and a track record of paying bills on time. Every late or missed payment is a red flag that could cause them to deny your application.
Pro Tip: Are you concerned about your credit score being too low? Be sure to check out How to Get RV Financing With Bad Credit for more on how to make your nomadic dream come true!
How long you can finance an RV will depend on several factors. Generally, used RVs will have shorter terms than when you buy new. Most loans are typically between five and 10 years. However, it’s not uncommon for this to get stretched to 10 to 15. For the most expensive RVs, you may see someone with a 15 to 20-year loan.
As a result, you must understand the terms before signing on the dotted line. Purchasing a recreational vehicle is a significant decision you shouldn’t take lightly.
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You should generally finance an RV for as short a time as possible. Sure, extending the terms on your loan will keep your payment low. On the other hand, you’ll also pay less toward your principal balance and more interest.
Your best bet is to pay as much as possible for a down payment and then pay off the loan as quickly as possible. This way, you own the unit outright and don’t have to continue making monthly payments to a lender. It’s one less thing to worry or stress about during your adventures.
Since you’re likely going to be financing your RV, there are several things that you can do to set yourself up for success. Here are five of our best tips every RVer should follow when financing an RV purchase.
The first thing you need to do is to determine your budget. The monthly payment needs to be enough that you’re making progress to pay it off but not so much that you’re struggling. You’ll need to consider a cheaper model if you cannot get the monthly payment to work with your budget.
When setting your budget, be realistic and honest with yourself. We’ve seen far too many RVers jump into the lifestyle with unrealistic expectations when it comes to finances. You may want to reconsider your purchase if you’re squeezing your budget tight month after month.
Checking your credit score is a good idea before heading to the dealership or entering a financing office. Lenders and the financing team will use your score when deciding the terms for your loan.
If you have a high score, you’re more likely to get approved and receive a lower interest rate. On the other hand, if you have a lower credit score or sketchy financial history, they may charge you a higher interest rate or deny your application altogether. If they’re going to deny you, there’s no use in letting them check your credit, which will only ding it again.
One mistake many borrowers make is only considering the options from the dealership. You may not know that dealership financing departments often tack a point or two onto an interest rate. This is perfectly legal and allows them to profit from the transaction.
To avoid this, consider arriving at the dealership with your financing. This will require you to shop around from banks, credit unions, and other lending institutions. As a result, this can save you thousands of dollars over the length of the loan and help you get the best deal possible.
It’s not just your monthly RV payment that you’ll have to worry about. Remember to consider the hidden fees and the costs of owning an RV. Storage fees, insurance, maintenance, increased fuel, and the cost of campground reservations likely cost more than you think.
Failing to factor in these additional costs can result in your RV sitting unused for extended periods. Some consumers sell their rigs after a year because they don’t use them enough to make them worth the costs.
When individuals go to sell their rigs soon after purchasing them, depreciation hits them in the face. If you thought that automobiles depreciated quickly, RVs are a whole new level. While some rigs depreciate less, some lose a third of their value in the first few years.
We’ve seen a dramatic increase in recent years of owners being upside down on their RV loans. This is mainly because they paid premium prices from 2020 to 2022, and now the market is tanking. If you try to sell your rig and owe more than it’s worth, you’ll need to cut the bank a check for the remaining balance. For some, this could be thousands of dollars.
The internet has many valuable resources to help you plan your future purchases. We recommend using an RV loan calculator to help you understand what to expect. These can be great as you can play with numbers and see how they work together to impact your monthly payment.
Remember, the longer you extend your loan, the more interest you’ll pay. While making your loan for as long as possible may be tempting, it’s not always the best financial decision. You want to repay the loan quickly while having enough left over for your other bills.
Financing an RV is a significant decision requiring knowledge and intentional thought. It’s not the type of purchase that you want to rush. If you’re like most consumers, making quick financial decisions typically doesn’t turn out well. Take your time throughout the process, and be sure you know all the terms. This way, you can make a solid financial decision.
