What’s an RV Loan Made Of?

If you’ve made the decision to purchase a travel trailer, fifth wheel or motorhome, you’re ready to get on with it and get out onto the road and into the wild. Not so fast! Unless you are prepared to pay cash, you will need to find a suitable loan—one that balances good rates with favorable terms. Some RV owners suggest keeping your loan balance as low as possible and paying as much as you can (down and monthly) to ensure that you don’t owe more than the current value of your RV as the years go by.

Here are the elements of an RV loan to consider…

Interest rate: Your rate is based on loan amount, loan term, age and type of RV and the way you will be using the rig. If your credit history is very good, you might be able to get a personal, unsecured RV loan, which usually offers a good interest rate.

Fixed vs. variable interest: Fixed rates are best. However, you are likely to pay a higher interest rate overall.

Loan minimums and maximums: Lenders offer different minimums and maximums depending on their ability to lend, as well as your credit history, type of unit and other factors.

Credit score and history: In addition to helping determine interest rate and length of the loan, your credit history is used to quality you for the loan. Standards can be stricter for RV loans.

Loan term: The amount of time your loan is active can vary widely, from a year to 10 or 15 years. Larger loans on bigger rigs are likely to have longer RV loan term.

Fees and penalties: Some RV loan fees, such as closing costs and filing fees, are normal and can be financed into the loan principle. Watch for balloon payments, prepayment penalties and hidden fees. You might get a better rate, but you overall cost could be greater.

Application type: Most companies offer online applications—convenient and fast. However, if working with your home town bank or RV dealer and you have plenty of time, it’s okay to use a paper application process.

Income verification: Lenders have different ways to verify income. In some cases, it’s only needed for larger loans.

Refinancing and loan structures: Revisit your loan in a year or two if terms are more favorable. Look into creating an LLC or writing off part of your RV as a business expense.

Consider getting pre-approved for your RV loan—it could help in negotiation. However, final loan amounts depend on the exact rig you choose, especially if it’s used for collateral.

NOW…once you finalize your loan and make your first payment, you are ready to hit the road!