Shopping For RV Financing
So. You’re shopping for an RV. Depending on the type of RV, they can cost as much as a small home. RV Financing is different from financing a car. An RV is a unique hybrid between a vehicle and a home while it is NOT a mobile home like we see in mobile home parks affixed to the ground. These are a wonderful way to see the country without the stress and headaches related to airports and flying. These are a lot more comfortable than the family sedan or minivan for extended road trips as you have built-in restroom and kitchen accommodations wherever you go, so say good bye to the frequent rest stops. But as earlier stated, RVs can come with a hefty price tag.
Since an RV doesn’t fall in the typical car category and is often a much more expensive purchase, even for a used RV. So you will need to find RV Financing. Securing financing for an RV could be more difficult than getting approved for a car loan. Depending on the length of your loan term and the amount you’re borrowing, qualifying for an RV loan could be similar to qualifying for a home mortgage.
Some lenders offer RV loan programs for borrowers with less than stellar credit. These are scores less than 650 – 700. All lenders will look at a number of other factors, such as debt-to-income ratio, employment history and income. Having a large amount of debt or a lack of income are among the issues that could prevent you from being approved. Ideally you want to keep your DTI below 40%. A good practice for credit worthiness health is to keep all credit utilization below 25%.
How The RV Loan Works
Financing an RV is no different than any other loan. Prospective borrowers submit an RV loan application to a lender. That lender reviews and evaluates the loan application based on several factors. The requirements can be stricter as loans get larger. The amount of documentation required also depends on the lender and the size of the loan.
Obviously, some RV Sales Dealerships offer RV Financing at their location. Smart shoppers find a way to get pre-approval for financing before stepping foot on the lot. Depending on who you go to, the lender may offer slightly different terms like the down payment and loan time frame to pay back. Your credit score plays a part in the equation as well. Depending on the bureau they pull from and the scoring model they use, your score can vary widely. It’s not as simple as CreditKarma would like you to believe.
How To Apply For RV Financing?
There are thousands of RV Financing companies you can go through. The Dealership, your bank, a Credit Union or some other company that specializes in RV Financing like
- GoodSam loans
- Lending Tree
- My Financing USA
The top 4 things to consider when selecting a company are:
- Their Rates – Find the lowest Rates
- Credit Protection – Reduce Inquiries that can damage your credit worthiness. Ask if they send multiple inquiries which hurts your credit or one at a time, to protect your credit.
- Easy Approval – Is it easy and fast to apply and get a fast response?
- Extra Bonuses – Do they offer extended service plans, extended service warranties, roadside assistance, tire and wheel incident coverage, 24 hour service tech over the phone concierge service, gap waivers, etc.?
Know Your Budget
First and foremost, figure out how much you are willing and able to comfortably spend on your budget. Just like buying a new home, don’t get sucked in by the add-ons which can blow up your budget.
Know Your Credit Score
The next is to know the credit score and the model used for this type of purchase. There are actually multiple scoring models and factors that influence that particular score based on the type of purchase. A home loan is scored differently from an auto loan differently from an RV, differently from a small personal loan, etc.
So getting your FREE online is not even close to accurate. This goes without saying that some lenders are also more strict than others. And if you start shopping for RV Financing to 5-6 different places, that will hurt your credit worthiness, so pick one and go with that for your pre-approval.
Save For A Down Payment
Generally speaking, RV dealerships require a down payment of 10% to 20% down payment of the purchase price—at a minimum. Start saving for a down payment now. Obviously, like any loan, a larger down payment will reduce your monthly payments and can decrease your interest rate and the overall cost of the loan.
This is a big deal if the loan is amortized, which calculates interest like a mortgage and that sweet low rate is not the same as a simple interest loan. On an amortized loan, look at the final total interest paid and you will see it is larger than that rate the lender states. As a rule of thumb, double the rate and ad a zero to the end and you will get closer to the actual interest rate of an amortized loan. They aren’t lying about that stated rate, It’s just how amortized loans are calculated.
Negotiate the Lowest total Price
Ah, just like buying a car, this is the part most people hate. Make sure you’re getting the best price possible. Do your research. Some dealerships markup RV prices by as much as 50% and many expect customers to haggle on the price. Also know which class of RV and make and model you want, a Class A or Class C, or maybe you want a Campervan or a towable? The best way to know which one is the best for you is to try before you buy. Many RV buyers determine their perfect RV by renting an RV through RVnGO.com for a week to get a feel for it and test out the features on a real trip.