RVs can cost anywhere from $10,000 to over $300,000, and higher-end ones can breach the million-dollar mark. Because of the high price, people generally borrow to finance their purchases. Purchasing an RV is a big decision, and it’s important to choose your financing options carefully.
RV trailer loans are a form of long-term financing, similar to auto loans, that work like any normal loan. During an agreed-upon stretch of time, one pays back the loan with interest, while the RV itself serves as collateral.
Differences Between an RV Loan and an Auto Loan
Since RV loans typically consist of a larger sum than auto loans, consumers are often given a longer period of time to pay them back. This can range anywhere from 1 to 20 years.
Also, an RV is classified as a luxury item, unlike a car. This means that interest rates may be on the higher side since lenders often worry that the terms of the loan may be broken in case of a financial crisis.
The qualification process for an RV loan is also more difficult than that for an auto loan. This means that your credit history will be an important factor lenders look at when determining your qualification status.
What About Credit Score?
Not only do lenders consider credit history when deciding whether to offer a loan, but they also look at your debt-to-income ratio, employment history, and more. The less debt you have, the easier it will be to qualify. If you’ve consistently paid back previous loans on time, you’ll have a much easier time qualifying for a lower interest rate.
What if your credit isn’t stellar? This isn’t uncommon, and it won’t entirely prevent you from securing a loan. However, you may need to pay more interest or make a larger down payment.
Secured vs Unsecured RV Trailer Loans
As we’ve established, the RV itself will serve as collateral, meaning it could be repossessed should you be unable to pay back your loan. Especially if you’re using the vehicle as your primary residence, this is an important factor to consider.
There are some exceptions to this, however. Some lenders will offer unsecured loans, which means you won’t have to offer any collateral. However, these loans will often be more difficult to qualify for and have higher interest rates.
Where to Look For a Loan
Often, the dealership itself will offer programmes through which you can finance your RV purchase. However, this isn’t the only option. Before making your decision, you should compare rates from multiple lenders to find the most affordable one for you.
Important Factors to Consider
When deciding where to borrow, first consider your budget. Depending on its size, you may want to consider a different style of RV to mitigate cost or reduce the size of your down payment.
Another important factor is the interest rate. Make sure you don’t bite off more than you can chew, especially with a secured loan. If you can’t make your interest payments, there’s a chance your mobile home will be repossessed.
Learn more about financing options and get a quote through our Contact Us page. Our representatives are happy to walk you through the process and answer any lingering questions or concerns you may have.