How to Finance an RV
Recreational Vehicles (RVs) are surging in popularity as people take to the roads for family vacations and closer-to-home explorations that combine freedom and fun.
“The RV industry is on track to break half a million RV shipments in 2021 for only the second time in our history,” said RV Industry Association President Craig Kirby.
In this article we’ll cover the essential information you need to know about purchasing an RV, how to finance an RV, RV financing options, and more.
Credit Union of Southern California (CU SoCal) is the fastest growing credit union in Southern California, providing competitive checking, savings, and loan products, quick pre-approvals, no application or funding fees, and more!
Call CU SoCal at 866.287.6225 to schedule a no-obligation loan consultation, or apply online today!
What Is an RV Loan?
An RV loan is designed to help people who specifically want to purchase an RV. Like auto loans, RV loans are secured (with the RV serving as collateral). Keep in mind, if you default on a secured loan, the RV will be repossessed. RV loans differ from car loans in that the interest rates on RV loans are higher and the repayment terms longer, from 10-25 years.
How Do RV Loans Work?
Many credit unions, banks, and recreation vehicle dealerships all offer RV loans and RV financing options. Like other loans, you’ll need to complete an application, provide your personal identification and other documents which the lender will review to see if you qualify. Once you’re preapproved, you’ll know how much RV you can afford.
RV Loan Terms
Loan terms, including interest rate, will vary by lender and depend on the type of RV (motorhome or trailer) and your ability to qualify based on credit score and finances. Some lenders have minimum and maximum loan amounts.
For example, CU SoCal offers these RV financing options:
- Up to 100% financing.
- New (2020 – 2021) Fixed Interest Rates: 6.85% – 16.85%.1
- Pre-owned (2011 – 2019) Fixed Interest Rates: 7.25% – 17.25%.1
- 180 month (15-year) maximum loan term for new and used motor home/trailer recreational vehicle loans.
- Loans include tax, license, document fees and extended warranty.
- No loan application fee.
- No prepayment penalty.
How to Finance an RV in 10 Easy Steps:
- Set a Budget: RV prices range from just a few thousand into the hundred thousands. How much can you afford to spend or borrow to make the purchase? Your budget may drive your decision whether to purchase a motorhome or trailer-style RV. Once you set a budget you can start saving and exploring your RV financing options.
- Choose the Right RV for Your Needs: You probably already have your heart set on a specific type of RV, but because RVs come in a wide range of sizes and prices, it’s important to create a budget, get preapproved for RV financing, and decide which style RV best meets your needs. This could mean choosing between a drivable motorhome or a towable trailer. Think about how much time you plan to spend traveling, parking options, and your comfort level when it comes to driving or towing an RV.
- Save for a Down Payment: When you decide you want to purchase and RV, it’s time to start saving for a down payment. Even smaller RVs can be pricy, so the sooner you start saving the better. The more money you save for a down payment, the less of a loan you will need to make the purchase, and you’ll save on interest over the course of the loan.
- Check Your Credit Score: The higher your credit score the lower your loan interest rate will be. You can check your credit score for free at Freecreditscore.com.
- Get Preapproved: Getting preapproved by the lender of your choice will help you shop more efficiently, because it’ll tell you how much RV you can afford to buy. Using your credit score and other financial information you supply, the lender will evaluate your ability to qualify and repay the loan. If approved, this is called preapproval.
- Decide What Kind of Loan You Want (Secured vs. Unsecured): An unsecure loan is one that’s based on the borrower’s credit score and doesn’t require the borrower to “secure” the loan with assets. A secured loan (a mortgage, RV or car loan) requires some type of security (the home or the vehicle), so if the borrower defaults on loan payments the lender may seize the asset. Although most RV loans are secured, some lenders offer an unsecured option.
- Shop Different Lenders: As we discuss later in this article, different lenders offer different RV financing options and different financing terms. Shop around with your local dealerships, banks, and credit unions.
- Consider Self-Financing with Home Equity: If you own a home you have an additional RV financing option, which is to take out a home equity loan. A home equity loan is a lump-sum loan for a fixed amount that is secured against your home. Like your mortgage, you repay the loan in equal monthly payments over a fixed-term. With this option, you’ll readily have access to a large lump-sum and utilize however you see fit. CU SoCal offers a home equity loan with a fixed rate as low as 5.25% APR and an affordable 15- to 25-year repayment plan.
- Ask About Tax Advantages: Under the U.S. tax code, RV buyers can deduct the interest on certain loans used to purchase RVs as a mortgage on a second home. Consult with a tax professional to see if this deduction, or other tax benefits, would apply to your purchase.
- Negotiate: Dealerships want your business and you can use this to your advantage. Whether you’re shopping for motorhome or trailer, don’t be shy about negotiating the best price and RV financing terms.
Where to Get an RV Loan
RV loans are provided by dealerships, banks, and credit unions. Be sure to do your research into all three options, as loan rates and terms will vary. However, credit unions tend to offer the best rates and low or no fees. These can be compatible or even better than dealership promotions.
RV manufacturers offer interest rate incentives to dealers which helps the dealer compete for your business. RV financing options will be plentiful at the dealership. The main difference between credit union and dealership financing is customer service. Down the road, if you have questions about your loan, you’ll communicate directly with the financing company that holds the loan.
Most banks offer RV financing options, though they may have higher rates than dealerships and credit unions. If you have an account at a bank, ask about their RV financing terms and RV financing options.
Loan interest rates are typically lower at credit unions. Credit Unions are non-profit organizations that reinvest their earnings into member discounts, which translates into savings for you. For example, CU SoCal has no application fee and no loan prepayment penalty on RV financing.
Why Savvy Consumers Choose CU SoCal
For over 60 years, the Credit Union of Southern California has been proudly serving Orange County, San Bernardino County, Riverside County, making CU SoCal Southern California's fastest growing credit union.
Please give us a call today at 866.287.6225 for an expert, no-obligation consultation or apply for a CU SoCal auto loan today!
1 Financing available up to 100% of retail/MSRP value including tax, license, and document fees. CU SoCal does not finance salvaged title or Lemon Law Buyback vehicles. For more information, please call our telephone service center at 562.698.8326. Payment factor based on maximum term. Minimum payment on all vehicle loans is $100. Rates include a .50% discount when you schedule automatic payments from or direct deposit to a CU SoCal Checking Account. Rate may adjust if you discontinue direct deposit/payroll or payment transfer. The above discounts are one time, and only apply at time of origination. The rates and terms above are effective as of 1/1/2021 and are subject to change without notice.