RV loans: 5 things to know

Group of friends having fun and playing cards in an RV.Image: Group of friends having fun and playing cards in an RV.

In a Nutshell

Recreational vehicles, or RVs, can be expensive. So before you shop for an RV, it’s a good idea to understand the financing options you might have, and the potential challenges of getting an RV loan.
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An RV loan can give you freedom to hit the road — but for a cost.

There are many kinds of RVs — and prices vary depending on make and model.

While an RV with all the comforts of home could cost anywhere from $60,000 to well over $1 million, smaller travel trailers can go for less. And beyond the sticker price, you’ll have expenses like gas, maintenance and insurance.

With an investment this big, it’s important to understand how RV loans work as well as potential challenges that come with RV financing. Here are five things to know before you begin to shop around for loans.

  1. You may need to use the RV as collateral
  2. Different types of lenders offer RV loans
  3. Qualifying for an RV loan can be a challenge
  4. You could pay a lot in interest
  5. You could end up owing more than what the RV is worth

1. You may need to use the RV as collateral

Like auto loans, many RV loans are secured by the vehicle itself. That means the vehicle acts as collateral to guarantee the loan. If you can’t make your monthly payments, the lender could repossess the RV.

Some lenders offer unsecured RV loans. With an unsecured loan, you don’t have to offer up any asset or property as collateral. But this makes unsecured loans riskier for lenders, so they often charge higher interest rates. If you have credit scores on the lower side, getting an unsecured loan can be harder because lenders may consider you a higher risk.

2. Different types of lenders offer RV loans

Dealers will typically have financing arrangements with some lenders, but you don’t have to get financing this way. Some banks, credit unions and online lenders also offer RV loans.

To make sure you get the most affordable loan possible for you, compare options from multiple lenders. If you can find a lower interest rate or reduced fees elsewhere, that may be better than financing through the dealership.

3. Qualifying for an RV loan can be a challenge

Securing financing for an RV could be more difficult than getting approved for a car loan. In fact, 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.

While some lenders offer RV loan programs for borrowers with rocky credit, these lenders will likely look at a number of other factors, such as debt-to-income ratio, employment history and income. Having a lot of debt or a lack of income are among the issues that could prevent you from being approved.

If you’re struggling to get approved for an RV loan, you may want to save more money to make a larger down payment. Borrowing a smaller amount reduces the risk to the lender and may increase your chances of approval — and you’ll pay less in interest in the long run. You can also wait and work on improving your credit to better your chances of qualifying for a loan.

4. You could pay a lot in interest

Some RV loan interest rates, or APRs, can range from just over 4.5% to nearly 18%. Rates vary by a number of factors, including lender, your credit, amount borrowed, down payment and loan term.

The length of your RV loan term could also affect how much interest you pay on your loan — a longer loan term means you’ll pay interest for longer. While many lenders offer loan terms of up to 10 to 15 years, some will allow you to pay back your loan for 20 years or even longer.

Let’s say you plan to purchase a $50,000 RV. If you make a $10,000 down payment and borrow the remaining $40,000 over 10 years at an interest rate of 6.5%, your total interest costs would be $14,503. If you paid it back over 20 years instead, that loan would cost you $31,575 in interest.

5. You could end up owing more than what the RV is worth

You may need to make a down payment to qualify for an RV loan. While lenders may recommend putting 20% down, some will allow you to put down as little as 10%. Some lenders don’t even require a down payment. But keep in mind that if you put little or no money down, you could end up owing more on your loan than what the RV is worth.

RVs can depreciate in value quickly, especially if you buy a brand-new one. A new RV could depreciate as much as 20% in the first year of ownership alone. If you plan to sell or trade in the RV in the future, you may not be able to get enough money back to pay off your loan.

If you can’t make the lender’s recommended down payment, consider buying a less expensive RV. This would allow you to borrow less and could help you pay down your loan sooner. You can always upgrade to a better RV later if you save the cash you need for a larger down payment.

Next steps

An RV loan is a big investment, so make sure the costs and financing make sense for your budget and financial goals. Here are some other steps to take as you’re deciding whether an RV purchase makes sense for you.

  1. Check on insurance rates and maintenance costs. These are ongoing costs that will last well beyond the initial purchase. After all, you want your RV to provide you with fun memories, not financial regret.
  2. Think about where you’ll park the RV while you aren’t using it.
  3. If you’ve decided an RV is for you, start researching lenders. Comparison-shop across loan issuers by checking on …
    • Interest rates
    • Length of loan
    • If collateral is required
    • Any other fees that may be associated with the loan

Calculate your RV loan

Estimate your monthly payments and how much you might need to borrow by using our RV loan calculator.

About the author: Christy Rakoczy Bieber is a full-time personal finance and legal writer. She is a graduate of UCLA School of Law and the University of Rochester. Christy was previously a college teacher with experience writing textbo… Read more.