RV Financing Options – Popular Ways to Finance a Motorhome

Motorhome RV on dirt roads camping in mountainsWhether for summer vacations with the family or the desire to make road trips feel more like home, an RV is a great thing to have when you’re planning to hit the open road. As with most vehicle purchases, though, an RV can put a significant dent in your wallet. For most, buying a new or used RV requires some type of financing from a bank, credit union, or another lender. Here are some new and used RV financing options to make your open road vacation dreams a reality.

Traditional Bank Loans

The majority of banks and credit unions offer RV financing through secured loans, similar to auto loan options. An RV loan through a conventional financial institution will be based on a variety of factors, including your income, your credit score and history, and the amount of the loan requested. For a large purchase like a new or used RV, most financial institutions require a relatively strong credit profile and verification of earnings. You may also need to provide a down payment to help lower your monthly payment.

New and used RV loans through a bank or credit union can be offered with a low interest rate, but how low is dependent on your credit and the length and amount of the loan. Repayment terms will vary from bank to bank, but most range from five to 10 years and offer a fixed, level monthly payment.

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Home Equity

If you’re a homeowner, you may have another option for financing your new or used RV purchase. A home equity loan or line of credit may be available if you owe less on your mortgage than what your home is worth. Home equity loans and lines of credit typically offer lower interest rates than what may be available through an RV loan, and repayment may be extended for a longer period. However, you must have equity in your home and strong credit to qualify.

Using your home equity may come with upfront closing costs to establish the loan or line of credit that you should factor in when considering this option. Also, your home is used as collateral to back the loan, not the RV, which could present problems should you fail to repay in line with the terms of your loan or line of credit agreement. However, you may be able to deduct the fees and interest you pay on the loan, when you do your taxes each year, so be sure to check with your tax professional.

Typically new and used RV financing options are limited to bank or credit union loans and home equity products given the amount required to purchase the vehicle. However, you could buy an RV with a personal loan, but it’s not likely going to be your best option. To prepare for your RV purchase, take the time to understand what you can afford to borrow based on your income and expenses each month, and know how the financing option affects your current and long-term financial situation. Before applying for an RV loan, home equity loan, or home equity line of credit (HELOC), make sure you have set aside enough money to satisfy any down payment requirements or closing costs associated with your chosen RV financing option.

Posted on March 27, 2017 by in Personal Loans, RV Loans

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