For adventure seekers who love the open road, purchasing a recreational vehicle (RV) is an exciting way to explore the country in comfort and style. However, with price tags ranging from tens of thousands to over $100,000 for high-end motorhomes, RV financing is necessary for most buyers.
In this RV loan guide, we’ll cover every guide to RV loans in 2023, from types of loans and lenders to interest rates, terms, costs, and tips for getting approved. Let’s hit the road to RV ownership!
What is an RV Loan?
An RV loan is a secured loan used specifically to purchase motorhomes, travel trailers, campers, and other recreational vehicles. The RV itself serves as collateral for the loan.
RV loans share similarities with auto loans and mortgages:
- You make a down payment toward the RV price
- A lender finances the remaining amount
- You repay the loan in monthly installments with interest
Like auto loans, RV loan terms typically run 2-10 years. But loans up to 20 years are possible for pricier motorhomes.
Interest rates, minimum down payments, and borrower eligibility requirements tend to be stricter compared to auto loans since RVs are considered luxury purchases by most lenders. But securing RV-specific financing enables extended terms that make payments affordable.
RV Loan Interest Rates
Interest rates significantly impact your long term costs. RV loan rates primarily depend on your credit score and history.
Here are average RV loan rates as of November 2023 for those with good credit:
- 5-7 year loans: 6% – 9%
- 10-15 year loans: 7% – 11%
- 20+ year loans: 8% – 13%
Online lenders like LendingClub offer RV loan rates as low as 3.99% for the most creditworthy borrowers. Banks offer average rates of 6-12% on RV loans.
Factors that influence your specific RV loan rate offer:
Credit score – The higher your score, the lower your rate. Scores below 600 are often denied.
Loan term – Shorter terms have lower rates. Long terms equal more interest paid over time.
Down payment – Larger down payments earn lower rates by reducing the risk for lenders.
Loan amount – Smaller loans tend to get better rates than large loans.
Loan type – Fixed rates remain the same. Adjustable rates start low but can vary up/down.
Compare rates from multiple lenders to find the most competitive financing option for your needs and budget.
RV Loan Terms to Know
RV loan terms define your borrowing amount, length of repayment, and other key factors. Be aware of these terms when financing your RV:
Loan amount – The total you’ll borrow to cover the RV price minus your down payment.
Interest rate – The annual percentage rate (APR) charged on the amount borrowed.
Loan term – The number of months/years allotted to repay the loan. Usually 10-20 years.
Monthly payments – The consistent payment amount made each month towards principal + interest.
Down payment – The upfront percentage of the RV price you pay before financing the remainder.
Origination fee – Upfront fee, usually 1-2% of the loan amount, to process the application.
The loan terms significantly impact your repayment experience. For example, longer terms have lower monthly payments but cost more in interest over time. Evaluate options to strike the right balance for your budget.
RV Loan Eligibility Requirements
Since RVs are luxury items, lenders have stricter eligibility standards compared to auto loans. Minimum requirements often include:
- Excellent credit score of 720+
- Low debt-to-income ratio (DTI), often below 36%
- Monthly income 3-4x the loan payment amount
- 10-20% down payment or more
- 5+ years of strong credit history
- No recent late payments or defaults
Meeting eligibility requirements proves your ability to manage the extra debt. This makes lenders view you as lower risk, resulting in better rate offers.
Those with poor credit or insufficient income may need to improve their financial profile or add a cosigner to qualify.
Where to Get an RV Loan
Many lenders offer RV financing, but here are some top options to consider:
Banks – Large banks like Chase and Bank of America. Often offer discounts for existing customers.
Credit unions – Membership credit unions provide competitive rates and great service.
Online lenders – Companies like LendingClub, Lightstream, and LoanDepot offer quick online applications and funding. Rates start lower than banks/credit unions.
RV dealerships – Dealers like Camping World provide in-house financing but typically have higher rates than other lenders. Offers convenience.
Peer-to-peer lending – Sites like LendingClub and Prosper connect individual investors looking to fund loans. Offers flexible options for borrowers in need.
Compare multiple lender rates, fees, eligibility criteria, and customer service reputation to find the best fit. Having an established relationship with a bank or credit union can provide an advantage during the application process too.
READ ALSO: The Ultimate Guide to Boat Loans in 2023
RV Loan Amounts
How much you can borrow for an RV loan depends on several factors:
- RV purchase price – More expensive RVs equal larger loans required. Luxury motorhomes can exceed $500,000.
- Your down payment – The more you put down upfront, the lower the loan amount needed.
- Your income/credit – Those with higher scores and income get approved for larger loan amounts they can manage repaying.
- Lender limits – Each lender sets their own minimum and maximum loan amounts offered. Many cap at $100,000.
For a $75,000 RV…
- 5% down = $71,250 loan
- 20% down = $60,000 loan
Look for a comfortable loan amount that aligns with your budget and still enables your desired RV purchase. Avoid the temptation to borrow more than absolutely needed.
RV Loan Term Lengths
One benefit of RV loans is the ability to stretch repayment terms longer than other loans to keep monthly payments affordable. Typical terms include:
- 2 – 7 years – Best for less expensive trailers or smaller loans. Equates to higher monthly payments.
- 10 – 15 years – Most common term length for mid-range RV prices. Provides a balance of interest costs and monthly payment size.
- 20+ years – Allowed for the most expensive Class A luxury motorhomes. Lowest payments but highest interest paid over decades.
The longer the repayment term, the lower your monthly payment will be. But also consider:
- You pay significantly more interest over the entire loan period compared to shorter terms.
- You risk still making payments long after you no longer own or use the RV.
Carefully weigh the pros and cons before automatically choosing the longest term just to lower your monthly costs. Pick the shortest term that you can reasonably afford.
Secured vs. Unsecured RV Loans
There are two main types of RV loans to understand:
Secured RV Loans
- The RV purchased serves as collateral for the loan.
- Approval is easier with lower requirements since the RV secures the lender’s investment.
- If you default, the lender can repossess the RV to recover losses.
Unsecured RV Loans
- No collateral is provided, only your signature.
- Approval is much harder with excellent credit/income requirements.
- Higher interest rates due to increased risk without collateral.
- No risk of the RV being repossessed if payments stop.
While secured RV loans have lower rates and easier approval, unsecured personal loans provide more flexibility. But you must qualify based on creditworthiness alone.
RV Loan Pre-Approval and Pre-Qualification
Before shopping for RVs, complete these two key steps:
Get Pre-Approved
- Pre-approval provides an official loan offer in writing before fully applying.
- Requires submitting income/asset docs for underwriting showing you meet eligibility criteria.
- Indicates a lender will finance up to a certain amount if approved. Gives you an advantage!
Get Pre-Qualified
- Pre-qualification only needs a soft credit check and basic personal details.
- It predicts potential terms you may qualify for based on your credit score.
- Quickly compare loan cost estimates across lenders without impacting your score.
Start by getting pre-qualified across multiple lenders, then submit documents to get a pre-approval letter from your top pick. This sets the stage for smooth sailing through the official application process later.
RV Loan Down Payment Amounts
The down payment is the upfront cash you pay toward the total RV price before financing the remainder. RV lenders typically require minimum down payments of 10-20% or more.
But benefits of a larger down payment include:
- Lower interest rate – More equity upfront reduces risk, earning you a lower rate.
- Lower monthly payment – Less financed means smaller payments.
- Shorter repayment term – Bigger down payments allow shorter terms of 5-10 years instead of 20-30 years.
- Loan approval chances – Improves eligibility if your credit/income is borderline.
- Equity protection – If the RV drops in value, more equity protects against owing more than it’s worth.
While tempting to put down as little as possible, a 20% or higher down payment sets your RV loan up for success if you can afford it. Evaluate your budget to decide the optimal amount for your situation.
RV Loan Application Process
Once pre-approved, here’s what to expect when formally applying for RV financing:
- Gather required documents like tax returns, paystubs, and bank statements proving your income and assets.
- Fill out the full loan application completely. Provide personal details, employment info, monthly income/expenses. Many can be completed online.
- Review your credit reports so you understand your score and history prior to the lender checking your credit.
- Pay any upfront appraisal fees for an appraiser hired by the lender to inspect the RV and ensure it’s worth the loan amount.
- Carefully read all final loan disclosures detailing the interest rate, terms, fees, and risks before signing your agreement.
- Respond promptly to lender requests for information to help the approval process go smoothly. Avoid applying for new credit before closing.
Once approved and your loan is funded, the money will be sent directly to the RV seller. You’ll then begin making your set monthly payments over the loan repayment term.
RV Loan Closing Process
The final loan closing process includes:
- A last credit check days before closing to verify your eligibility remains unchanged.
- Reviewing the final closing disclosure outlining exact loan costs, fees, payment schedule, etc.
- Signing final loan documents and providing any pending down payment funds on your closing date.
- The lender transfers the approved loan amount directly to the RV seller.
- Complete RV registration, titling, and required insurance in your name. The lender is listed on the title until the loan is fully paid.
After closing, the RV is all yours to enjoy! But stay on top of payments and insurance requirements to avoid defaulting per the loan agreement.
RV Loan Fees to Budget For
When estimating your total costs, be aware of these common RV loan fees:
Interest charges – The largest fee, total interest paid depends on your rate and loan term. Budget this into monthly payments.
Origination fee – Upfront fee of 1-2% of the loan amount to process the application. Lowers amount paid directly to the RV seller.
Appraisal fee – $300-$600 fee covers the appraiser visit to inspect and value the RV. Sometimes waived for new RVs.
Application fee – $50-$100 to cover credit checks and underwriting costs when applying.
Closing costs – Title, registration, transaction fees due at closing. Ask for an itemized estimate.
Late fees – Around 5% of a late monthly payment if more than 15 days past due.
Prepayment penalties – Possible if paying loan off early, usually in the first 2-3 years of the loan.
Factor in these fees to understand the total costs. Compare options to find lenders with minimal fees or perks like fee waivers for the most creditworthy borrowers.
Alternatives to RV Loans
Besides traditional RV financing, also consider these options if needed:
Personal loans – Unsecured so higher rates than secured RV loans, but faster approvals from online lenders without collateral requirements.
Home equity loan – Tap home equity to borrow at low rates, but risk losing your home if payments stop. Rates can be adjustable.
Credit cards – Easier to get but very high interest rates, so only viable for smaller RV purchases you can quickly repay.
HELOC – Home equity line of credit offers flexible access to approved credit limits as needed at variable interest rates.
401k/IRA loan – Lets you borrow your own retirement money, but risky if you lose job or default since huge penalties apply. Not recommended.
Payment plans – Some RV dealers finance sales directly through their own financing programs but charge the highest rates.
Evaluate all pros and cons before choosing the best RV loan alternative for your financial situation and credit history.
Should I Buy or Rent an RV?
Instead of buying an RV via financing, you may consider renting. But what are the tradeoffs?
RV Rental Pros
- Far lower monthly costs than loan payments
- Access to different RV classes before buying
- Avoid used RV risks and new RV depreciation
- Walk away easily without ownership burden
RV Rental Cons
- More expensive than owning if used often long-term
- Limited annual mileage restrictions
- Less freedom and customization
- No equity earned despite years of payments
For occasional use, renting can save substantially compared to purchasing. But frequent RVers are still better off buying. Try renting first if undecided to see if the lifestyle suits you.
How to Improve Your Chances of RV Loan Approval
If your credit or financial profile currently falls short of qualifying for the best RV loans, here are steps to improve your odds:
- Pay down existing debts to improve your DTI ratio
- Dispute any credit report errors dragging down your scores
- Open a new credit card and make on-time payments to build positive history
- Become an authorized user on someone else’s account to add positive account history
- Save up to make a larger down payment and reduce the amount you need to finance
- Add a cosigner with great credit to improve eligibility on a joint loan
- Write lenders explaining any past red flags and emphasizing recent credit improvements
With some diligence, those with marginal credit can strengthen their case for affordable RV approval in the coming months. But rushing into RV living before you’re financially ready can backfire.
Questions to Ask Lenders When Applying
Don’t hesitate to ask lenders these important questions when submitting your RV loan application:
- What credit score minimum is required?
- Will you do a hard or soft credit check?
- What debt-to-income ratio do I need to qualify?
- What down payment percentages do you require?
- Are there loan origination or application fees?
- Do you charge prepayment penalties for paying off my loan early?
- How long does the application and approval process take?
- How soon can I get funding after approval?
- What insurance coverage is required during the loan?
- Can I add a co-borrower if I don’t qualify on my own?
Asking questions upfront prevents surprises down the road. It also helps you understand what it takes to get approved with each lender before applying.
What to Do If Your RV Loan Application is Denied
Don’t despair if your RV loan application is denied. Here are constructive steps to take:
Ask why – Find out the specific reasons for denial so you can work to improve in those areas. Common reasons include debt, income, or credit history issues.
Review credit reports – Mistakes on your reports dragging down your score could unjustly impact approval odds. Dispute any errors.
Add a co-signer – Applying with someone who has better credit/income can help you qualify and get better rates. Offer to handle payments so they aren’t financially burdened.
Improve your credit – Take steps over the next 6-12 months like paying down balances and opening new positive accounts to boost your score, then reapply.
Save a larger down payment – Putting down 20% or more gives you a much better shot at approval and earning lower interest rates. Wait and save if needed.
Explain past red flags – Write lenders directly highlighting recent credit improvements and reassuring your ability to responsibly make payments.
With effort, those declined at first can strengthen their financial case and try again in a few months for RV approval. Patience and diligence pay off. Don’t settle for suboptimal loan terms in a rush.
Compare RV Loan Offers Carefully
When approved by multiple lenders, the temptation can be to just accept the first offer. But taking time to thoroughly compare offers ensures you get optimal RV financing.
Key factors to compare include:
- Interest rate – Even small variances equal thousands in savings over the loan term.
- Fees – Take into account origination, application, and processing fees. They add up.
- Loan term options – Weigh monthly payment affordability against total interest costs over different terms.
- Prepayment policy – Major prepayment penalties can negate savings from refinancing later at a lower rate.
- Co-borrower options – Adding one with great credit can significantly lower your interest rate.
- Discount opportunities – Look for rate reductions for auto-pay, existing customer status, new account opening bonuses, etc. These provide savings.
- Customer service reputation – Read reviews on responsiveness, tools provided, and transparency when researching lenders.
Avoid rushing into the first loan offer. Vet the fine print of each against your goals to select the most affordable option from a lender you trust.
Refinancing an RV Loan
After buying your RV, you may eventually want to refinance for better terms, just like refinancing a mortgage. This makes sense if:
- Your credit score has improved a lot, qualifying you for lower rates now.
- Interest rates in general have dropped significantly since you took out your original loan.
- You want to remove a co-signer from the existing loan.
- You need to lower the monthly payment amount.
- There are no prepayment penalties on your current RV loan.
To refinance, choose a new lender who will pay off your current RV loan balance entirely. You then get a new loan with improved terms and restart your payments. Refinancing can definitely lower rates and monthly costs, but it resets your loan repayment timeline as well. Make sure the math works out to justify starting over before absorbing refinancing fees.
Carefully weigh whether refinancing helps or hurts your overall payoff goals before switching lenders and extending your repayment schedule. Don’t refinance just for minor savings.
Tips for First Time RV Buyers
If this will be your first time purchasing and financing an RV, keep these tips in mind:
- Attend RV shows to explore different models and floorplans before deciding on one.
- Hire an inspector to thoroughly examine any used RV you’re considering before purchasing to identify potential issues.
- Get insured early. RV insurance is required for financing and rates vary widely based on storage, driving history and other factors.
- Understand all ownership costs beyond just loan payments, like insurance, maintenance, campground fees, storage, gas, etc. Make sure they fit your budget.
- Be realistic about your planned RV trip frequency. Will your enthusiasm wane after a few years? Buying too much RV for limited use is unwise.
- Consider buying a used or smaller RV as your first to get experience before upgrading later.
- Don’t default to the maximum loan term out of temptation. Pick the shortest term you can afford to pay off your RV faster.
Doing your homework upfront sets first-time RV owners up for success in getting many miles and years of enjoyable use out of their purchase!
Pros and Cons of RV Loans
Consider these potential advantages and drawbacks of financing an RV:
Pros
- Extended loan terms make payments more affordable
- Interest rates lower than alternatives like credit cards or personal loans
- Allows purchasing a more expensive, better equipped RV than paying cash
- Builds positive credit history through on-time payments
Cons
- Pay interest on a depreciating asset
- Large loans can negatively impact your debt-to-income ratio
- Long terms mean paying interest for decades in some cases
- Collateral means you lose the RV if you default on payments
For major RV purchases, financing is required for most buyers. But borrow wisely within your budget to avoid regret down the road.
Is an RV Loan Right for Me?
As you evaluate financing options, ask yourself:
- How much can I afford to budget each month for an RV loan payment?
- Will an RV loan prevent me from saving adequately for other goals like retirement?
- How often will I realistically use the RV to justify the cost?
- Do I have strong enough credit and income to qualify for reasonable loan terms?
- Am I prepared for increased insurance, campground, maintenance, and ownership costs?
- Can I make other lifestyle cuts if needed to free up money for RV payments?
- Is RV ownership a lifelong dream or a temporary adventure that may fade?
Unless you can pay cash, RV loans provide access to purchase the recreational vehicle of your dreams for those with solid financial standing. But be realistic about your situation before borrowing.
RV Loan Mistakes to Avoid
When searching for and applying for RV financing, sidestep these common mistakes:
- Not checking your credit before applying
- Assuming your income alone meets lender requirements
- Focusing only on the monthly payment, ignoring total interest costs
- Taking the maximum loan term to lower payments, extending total interest paid
- Overlooking fees beyond just the interest rate
- Paying loan closing fees out of pocket rather than financing them
- Accepting the first loan offer without shopping competitor rates
- Skipping inspection of any used RV before purchase
- Failing to obtain proper RV insurance after purchase
- Applying for other new credit before closing
- Not budgeting for ownership costs beyond the loan payment
Avoiding missteps ensures your RV loan works optimally for you. Careful preparation makes financing rewarding rather than risky.
To Recap
We hope this detailed guide gave you all the RV loan details needed to make smart financing decisions and get on the road to RV ownership! The key is securing affordable terms that fit your budget and financial situation through research, asking lenders the right questions, and avoiding mistakes.
By understanding costs, comparing loan offers, and having realistic expectations – you can start adventuring soon with an RV loan that takes you the distance.
Frequently Asked Questions About RV Loans
What credit score is needed to buy an RV?
To qualify for the lowest rates, you’ll typically need a minimum score around 720-740. Approval may be possible with scores in the mid 600s but with higher interest rates. Scores below 600 will face difficulty securing an RV loan.
Can I get an RV loan with bad credit?
It can be challenging to qualify for an RV loan with “bad” credit below 600. Specialty subprime lenders may approve those with poor scores but with very high interest rates. Improving your credit or saving a substantial down payment are better options.
How much down payment do I need for an RV loan?
Most lenders want a minimum down payment of 10-20% of the RV purchase price. But a larger down payment of at least 20% is recommended to get the best loan terms and lowest interest rates.
What is the easiest RV loan to get approved for?
Secured RV loans backed by the RV itself as collateral represent the easiest loans to get approved for since the RV reduces risk. Easiest options are a loan through your current bank/CU where you have an existing relationship or financing directly from an RV dealer.
How old of an RV can you finance?
Lenders are often reluctant about financing RVs older than 15-20 years due to greater risk of condition issues and less remaining useful lifespan. But some lenders may approve loans for RVs up to 30 years old depending on the maintenance history and inspection.
Can I get an RV loan without proof of income?
Most lenders require documented proof of your income, tax returns, and paystubs before approving RV loans to ensure you can afford repayment. “Stated income” RV loans without documentation do exist but come with much higher interest rates to offset the risk.
Is interest on an RV loan tax deductible?
You cannot deduct RV loan interest on your taxes as you can with mortgage interest. The IRS does not classify RV loan interest as a tax deductible expense, even if you live in the RV full-time.
How long do RV loans last?
Typical RV loan repayment term lengths range from 10 years up to 20 years for larger and more expensive Class A motorhomes. A 15-20 year term is most common to balance monthly payment affordability against total interest costs over decades.
Can I trade in my old RV?
Yes, many RV dealers accept trade-ins of your used RV to put toward another RV purchase. The value they offer will be based on assessing your RV’s age, condition, features, and demand for the make/model. Trading in can help lower the amount you need to finance.
In another related article, Types of Personal Loans and Their Uses
