How to Apply for a Used RV Loan
Updated on April 24, 2024 / 3 min read
Purchasing a recreational vehicle or an RV is often a substantial investment. Additionally, expenses, such as maintenance and repair costs, need equal consideration as they might significantly increase the overall price. If trying to save money while reaping the benefits of outdoor travel, a used RV can be an appealing choice. That said, used RVs come with a heavy price tag. In such cases, exploring loan options can be highly beneficial.
Used RV loans
These options work quite similarly to conventional used auto or car loans. The only difference between RV and auto loans is their interest and loan terms. Besides this, the monthly payments for RV loans are usually higher than those for traditional car and new RV loans. For example, RV loan rates generally start at around 5.24% and go up to 9.74% for new campers. Meanwhile, the loan rates range from 6.49% to 10.24% for used RVs. Also, in most cases, the minimum and maximum loan amount varies from that of auto loans.
One can get a loan from third-party dealers like banks, financial institutions, and private auto dealers. The loan rates may differ from one institution to another, so comparing them can help one make a financially informed decision.
Tips to apply for a used RV loan
The process of applying for a used RV loan is the same as that for a used car loan. One needs to approach a lender and have a decent credit score.
1. Check the credit score
When applying for any kind of loan, the most favorable interest rates are typically offered to individuals with a strong credit score. This also stands true when securing financing for a used RV. The disparity in interest rates for a used RV loan can be significant based on the borrower’s credit score. A high credit rating can result in interest rates that are thousands of dollars lower than those offered to individuals with lower credit scores. So, it becomes imperative to actively review one’s credit score and make amends to maintain or improve it. One effective approach is to leverage free credit reporting services to gain insight into specific areas that may need attention. Additionally, ensuring that all bills are paid on time and keeping credit card balances as low as possible can increase the credit score. This will increase the chances of securing the best interest rates for used RV loans.
2. Get a pre-approved loan
A pre-approved loan can be useful, especially when purchasing a pre-owned RV from a private seller. By securing this loan, the borrower can get an insight into the maximum loan amount one can avail of and the corresponding interest rate. This knowledge enables one to potentially secure lucrative interest rates and negotiate with an RV dealer. Additionally, having a pre-approved loan empowers one to decline any financing offers from dealerships if the terms are unfavorable. Besides, such loans serve as a valuable benchmark for comparing loan rates. Also, it’s important to explore loan options across different lenders to assess the varying rates available for used RVs. That said, make sure to make multiple inquiries within the 15- to 45-day period, as it can mitigate their impact on the credit score, as inquiries within this time frame are typically viewed as one.
3. Make a substantial down payment
When applying for a used RV loan, making a substantial down payment can help one avoid paying heavy monthly installments. The large upfront payment can significantly reduce the total amount paid in interest over the loan term. For instance, if one is making a down payment of about $3,000 on a used RV for $29,000, a total of about $29,769 will have to be paid over 48 months with a 6.8 percent APR loan. Remember, this amount may also include sales tax that differs across states and may add to the price tag. On the other hand, if one makes a down payment of about $5,000, they can easily save around $300 on the loan and benefit from lower monthly payments. Besides, most lenders do not provide loans for RVs older than 10 to 12 years. So, a higher down payment may be necessary for older models.
4. Avoid long-term loans
Choosing loans with longer terms is a common mistake, as many think they will have lower monthly payments. But, opting for longer loan terms also means paying more interest over the life of the term and possibly facing higher interest rates. To avoid these pitfalls, it is best to opt for the shortest loan term within budget.
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