Owning an RV is a dream for many people.
Maybe you want to travel the country without having to worry about booking lodging. Or go camping without giving up all of the creature comforts of home.
Perhaps you’re itching to downsize and adopt a more mobile lifestyle — one where you’re not tied down to a mortgage or lease.
A recreational vehicle provides you with freedom to explore. But this dream also comes at a cost.
Buying an RV can set you back anywhere from $35,000 to $300,000, according to Cruise America. That’s why many buyers choose to finance their purchase with an RV loan.
What Is an RV Loan?
An RV loan finances the cost of buying a recreational vehicle. When you sign an RV loan, you’re agreeing to pay back the lender over time and with interest. The terms are typically longer than car loans and they carry higher interest rates.
Because RVs can cost hundreds of thousands of dollars, many prospective owners use RV loans to make their purchase.
RV loans aren’t the same as a typical auto loan you might apply for if you were buying a new car. A recreational vehicle is often seen as a luxury purchase. According to Camper Report, interest rates for RV loans tend to fall between 4% and 6%, but factors such as purchase price, the age of the vehicle, your credit score and the length of your loan can cause you to have a higher or lower interest rate.
The length of your RV loan term will probably be longer than your average car purchase, so you have more time to pay off the loan. While you can get a two- to five-year loan, you might qualify for a 20-year loan for an RV with a six-figure purchase price. In that case, your loan will be more similar to a mortgage than an average car loan.
An RV loan with longer loan terms means you’ll have lower monthly payments. However, you’ll end up paying more interest over time. If you can manage the higher monthly payments, you’ll save money with a shorter loan.
Options for RV Financing
If you’re looking to finance an RV, some of the most popular options are to get financing through your RV dealership or to get an RV loan from a bank, credit union or online lender. For smaller RV purchases, you may be able to use a personal loan.
RV Dealership Loan
If you’re purchasing your RV from a dealership instead of a private individual, you’ll probably be offered financing through the dealership’s in-house lender or financial partners.
While this is a convenient way to access financing, you might lose out on finding the best deal by comparing quotes from multiple lenders.
However, the RV dealership might be more apt to negotiate with you on the purchase price or throw in extras, like discounts on future maintenance work.
RV Loan Through Banks, Credit Unions or Online Lenders
Another option is to get an RV loan through a bank, credit union or online lender. You could choose a financial institution that you already have an account with, but you don’t have to.
Getting quotes from multiple banks, credit unions or online lenders will help you find the best deal. Just keep your loan shopping within a two-week window so your credit score won’t be dinged for multiple credit inquiries. Or you could use an online loan marketplace, like Lending Tree, to compare rates from different lenders.
Getting preapproved for an RV loan before you shop shows you’re a serious buyer. You’ll also have more negotiating leverage to get an RV dealer to offer you better financing.
Unsecured Personal Loan
If you’re making a smaller RV purchase — for example, buying a used camper trailer for under $10,000 — you might consider taking out a personal loan.
Some lenders for RV loans have a minimum threshold for taking out a loan. If your purchase price falls below that amount, applying for a personal loan might be the best route for you.
Unlike the RV loans you’d get from dealerships, banks, credit unions or online lenders, a personal loan is an unsecured loan, meaning you aren’t putting down any collateral to take out the loan. Most other RV loans are secured loans with the RV itself being the collateral.
If you were to default on a secured loan, the lender could repossess your RV. If you default on a personal loan, your lender would not be able to take away your RV. However, they could sue you for defaulting on your loan.
Unsecured loans often have higher interest rates than other RV loans, so expect higher monthly payments with personal loans. However, you don’t have to worry about a down payment, like you would with a secured RV loan.
5 Steps to Getting an RV Loan
Now that you know how RV loans work and the different options for financing, these steps will walk you through how to finance an RV.
1. Determine a Budget for Your RV Purchase
Whether your RV is a luxury purchase or you plan to use it as your primary residence, you’ve got to make sure it’s something you will be able to afford.
How much money do you have available each month after paying all your bills, making payments on existing debt and covering recurring expenses like groceries and gas?
Note that your financial obligations for your RV will go beyond your loan repayments. You’ll also need to factor in the sales tax, vehicle registration fees, RV insurance, maintenance and repair costs, fuel to power your trips and any parking or storage fees.
Once you have an idea of what you can afford on a monthly basis, you’ll be able to narrow your purchase options down to something that’s within your budget.
2. Check Your Credit
Your credit score will determine whether you qualify for a loan and what the interest rate will be for paying back your RV loan. The higher your credit score, the better position you’ll be in to secure an RV loan with a low interest rate.
Ideally, you should have a credit score of 700 or higher before applying for an RV loan. Some lenders may work with borrowers with lower credit scores, but you may have to provide a larger down payment and agree to a higher interest rate.
You can check your credit report from each of the three credit reporting bureaus — Equifax, Experian and TransUnion — for free at AnnualCreditReport.com.
3. Save Up for a Down Payment
Similar to auto loans or mortgages, you’ll need to come up with a significant amount of cash upfront when purchasing an RV.
Expect to make a down payment of at least 10% of the purchase price, though some lenders may prefer closer to 20%.
Save up for this amount over time by setting up a sinking fund and contributing a set amount to it each month or each time you get paid. Add any financial windfalls, like a work bonus or tax refund, to your savings to reach your goal even faster.
4. Shop Around for the Right RV and Lenders
An RV is a big financial commitment, so take your time to shop around and find the right RV for you — one that meets your needs and desires and is within your budget.
Take stock of how you’ll be using your RV. Will you need extra space for your grandkids? Do you need something suitable for off-road adventures?
Also make sure to shop around for lenders. Getting quotes from multiple lenders can help you find the best deals.
5. Submit a Loan Application and Sign Off on Final Paperwork
The final step in your journey to buying the RV of your dreams is to complete and sign off on all the loan paperwork.
In addition to checking your credit score and requiring a down payment, your lender will need information about your income and current outstanding debts. Your lender may even require an inspection — similar to a home inspection for a mortgage loan — which might set you back an additional couple hundred dollars.
You’ll also need to register your vehicle and get insurance coverage as part of the final step to RV ownership.
Alternatives to RV Loans
There are other ways of fulfilling your dreams of RV life without taking out an RV loan.
You could save up enough cash to buy an RV outright without the need for financing. This may require setting a savings goal and spreading out the cost over several years.
You might also consider renting an RV instead of buying one — especially if you don’t plan on taking frequent trips with your RV. Cruise America, Outdoorsy and RVshare are just a few options for finding RV rentals near you.
Frequently Asked Questions
What are typical RV loan terms?
The length of an RV loan can vary widely. You could get a short 12-month RV loan or a loan as long as 20 years. Just be aware, the longer the loan term, the more you’ll pay in interest.
What credit score do you need for RV financing?
Having a credit score of at least 700 shows lenders you are in good standing to responsibly borrow money. Some lenders may approve loans for borrowers with lower credit scores, but expect a higher interest rate and to perhaps put down a higher down payment than someone with good or excellent credit.
What are average RV loan interest rates?
Interest rates for RV loans tend to fall between 4% and 6% for those with good credit. However, the interest rate can vary due to a number of factors, such as the purchase price, the length of the loan and the age of the RV.
What should your debt-to-income ratio be for RV loans?
Lenders look favorably on borrowers with debt-to-income ratios under 40%. However, some lenders will consider buyers with debt-to-income ratios up to 50%.
Nicole Dow is a senior writer at The Penny Hoarder.