Buying a new or used RV is an exciting time albeit stressful. If you are planning to finance your purchase, there are several considerations to be aware of. Following are a few tips for securing the best RV loan.
Check Your Credit
Before you set out to find the perfect RV, check your credit. Ideally, your credit rating should be strong (above 700) in order to qualify for the lowest interest rate. Checking your credit in advance will give you time to clear up any issues or report any inaccuracies. If you find your overall credit score is lower than expected (under 700) consider waiting. Take a few months to raise your score before applying. A higher credit score could save you a point or two on the interest rate. These savings could mean thousands of dollars over the life of the loan.
Check the Age of the RV
If you are buying a used RV check the age of the unit to ensure your finance company will extend credit. Some finance companies won’t loan on RVs of a certain age. Typically 10 years or older lending institutions shy away from loans. For used RVs, it may be advantageous to look for a slightly newer model to ensure you will be able to finance your purchase.
Shop Around
Like any loan, it’s always best to shop around to see where you find the best rate and terms. Always be sure to check if there is a prepayment penalty as well as the closing costs. If you are purchasing from a dealership, ask who their preferred lenders are or if they offer an in-house finance option. Many times, because of the volume of business dealerships have preferred terms. Always check other lenders both local and online banks and credit unions. Having multiple approvals will afford the opportunity to compare the best rates and terms.
Know Your Options
Besides traditional financing, there are a couple of additional options to consider. The first of which is a loan against a 401k account. Depending on your plan, this may be a lower payback interest rate than traditional financing which saves you money and lowers your monthly payment.
A second option to consider is a home equity loan or line of credit. Again, check with several banks and credit unions. Compare terms, rates, and if the funds can be used for things other than home improvement. Many times a HELOC doesn’t require you to disclose the purchase as you are using the equity in your home as collateral.
Finally, check your investment accounts to see if any offer a loan option. Similar to a 401k loan, some mutual funds and other investments may allow for a loan. Be sure to read the fine print and ask what the payback terms, as well as the interest rate, applied.
Time Share aka Fractional Ownerships
If purchasing is out of the budget or there will only be limited times in which to use the RV, consider a timeshare investment. There are companies that will offer fractional ownership in an RV. Similar to a timeshare condo, you pay an upfront fee as well as an agreed-upon annual amount which includes service and maintenance. In exchange, you will have access to the RV for a specified number of weeks or months during the year. This can be a great way to see if you like the RV lifestyle and will really use it as expected. Be sure to check the cancellation terms or options to sell your part of the ownership.
While the timeshare option isn’t technically an RV loan, it’s an option to be considered if you are not able to qualify for a traditional loan or you aren’t quite ready to make the leap into full-time ownership.
Final Thoughts
Above all, be sure to check all your options. Weight the pros and cons of the various finance and loans available based on your credit profile. When in doubt seek professional advice from a financial planner or someone you trust to give you financial advice.
Don’t forget to calculate the total cost of RV ownership into the budget. Expenses that are easily overlooked include insurance, maintenance, storage, and running costs. All of these expenses add up quickly and can impact the overall budget as to what type of RV is most affordable.
Bottom line, do your homework, know your options, and don’t rush into any purchase. Never, ever spend more than you can comfortably afford.
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