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RV Financing FAQ
Will one RV lender offer better interest rates than another RV lender?
Interest rates change frequently. If the prime rate goes up RV finance rates will go up too. RV lenders send updated rate sheets to RV dealers whenever their rates change. RV specialty lenders watch each other closely and if one lender lowers interest rates the other lenders generally follow suit. They will usually stay within a quarter to a half point of each other.
Are there other factors that will determine what interest rate I get?
Yes, there are several factors that will determine the rate you get.
- It depends if the RV is new or used. A used RV (normally over 3 or 4 years old) will get a higher interest rate than a new RV will.
- Your down payment will affect your interest rate. If you finance the RV on a zero-down program the interest rate will be higher.
- The term on the loan will affect the interest rate. The shorter the term the higher the rate, the longer the term the lower the rate.
- The amount financed will affect the interest rate. The lower the dollar amount the higher the rate, the higher the dollar amount the lower the rate.
- Your credit history (credit rating or score) will affect the rate. The better your credit score the lower the interest rate.
- Carefully read the section on finance terms and interest rates in this chapter.
Should I shop around for a better rate, or will the rate they offer be the best rate I can get?
You should be aware of what the current rates are for RV loans and based on the criteria listed, determine if you are getting the best possible rate you can get. If you think you qualify for a lower rate, by all means try securing a better rate elsewhere. There are several RV specialty lenders on the internet that would like your business and will offer competitive rates.
Do not however let too many lenders run a credit check on you in an attempt to get a lower rate. This can backfire so be selective about who is running credit checks. If lenders make several inquiries on your credit history your credit score can be lowered causing you to get a higher interest rate. The reason for this is, when banks see numerous inquiries they are under the impression you are having trouble securing a loan and could be a credit risk to the bank. While we’re on this subject, when the RV dealer is going to run a credit check make sure you tell them to only submit your application to one lender. Some unscrupulous finance personnel think it’s easier to submit your credit application to all of the banks at one time, leaving you with numerous credit inquires.
Can you explain more about financing an RV with no money down?
There are usually a couple of lenders that will offer no money down finance programs. These programs will have certain guidelines to qualify. The type of RV, dollar amount, term of the loan and your credit rating can all factor into these types of programs. The finance rate will usually be higher too.
What length of term can I expect to get on an RV loan?
The term of the loan will be based on the dollar amount financed and the age of the RV. Some RV lenders are offering 20-year loans on financed amounts over $100,000 and loans ranging from $25,000 to $99,000 can qualify for 15-year loans. Loan amounts between $10,000 and $25,000 may qualify for 10 to 12 years repayment terms.
Why would anybody want to pay the interest on a 15 or 20-year loan?
The biggest advantage of a long-term loan is you get a lower monthly payment. Financing $100,000 for 240 months at 7% interest would be $775 a month. The same loan for 120 months would be $1,161 a month. You save almost $400.00 a month. But keep in mind you will have little or no equity if you try to trade the RV in within the first few years.
There are several things you need to consider when you determine what the best term would be for you.
- How much can you afford to pay every month? The term of the loan directly affects the monthly payment.
- How long do you plan to keep the RV? If you only plan to keep it for 3 or 4 years you won’t be paying all of the interest anyway. The downside to this is you won’t have any equity built-up in it either.
- If you plan to refinance the loan, or pay the loan off before the full term, a longer-term loan would probably make more sense.
- If you plan to keep the RV for the life of the loan a shorter-term loan might be better for you. Make sure you can handle the higher monthly payments and the more you can put down initially the better.
Can I finance an RV with below average credit?
RVs are for the most part considered a luxury item, so the criteria to finance an RV are more stringent than it is to finance an automobile. There are lenders that will finance below average credit but interest rates will be higher.
How is the interest on an RV loan calculated?
The majority of RV loans from RV specialty lenders are simple interest fixed rate loans. What this means is you will only pay interest on the principle owed, and in most cases, there is no penalty for paying the loan off early. If you choose to pay more than your required monthly payment you can shorten the term of the loan and save on interest.
Will I need a down payment and if so how much?
Down payments will vary slightly between RV lenders but 10 to 20% down, in the form of cash or a trade-in, is usually the range. There are programs that offer low down, or no down payment but this will usually increase the interest rate. Most banks want to see your good faith commitment to the loan.
Do I need insurance on the RV to get a loan?
Yes, insurance is required when you close on the loan. The bank will not loan the money until they have proof of insurance. See Chapter 5 on RV insurance.
Should I finance the RV or pay cash?
It is my personal opinion that it makes more sense to finance your RV purchase. If you finance the RV you can maintain your personal financial status without liquidating any assets. You can also take advantage of writing off the interest on your income taxes if the RV qualifies.
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