Guaranteed RV Financing: Is It A Good Idea?
If you’ve considered getting a recreational vehicle, you already know they’re not cheap. That’s where RV financing comes into play. If guaranteed approval for RV financing has caught your eye, there are several factors to consider before signing.
An RV is considered a luxury item, which means that credit requirements for RV loans may be relatively stringent; generally, you’ll need a score of at least 650 to get approval. Some lenders, however, will offer “guaranteed” RV financing — loans without a credit check.
The catch? APRs can be high, so don’t expect to see 0% financing like you would at a car dealership. Such deals are routinely offered by car manufacturers for those with good or better credit, but offers like these are rare for RV manufacturers.
Let’s take a look at the different types of RV financing, what you need to know before you consider taking out a “guaranteed” loan, plus alternatives.
Where can you find RV financing?
You have several options for where to get an RV loan, but the primary ways are financing through a dealership or a bank. There are a few things you’ll want to consider when looking into RV financing, including whether you’re buying new or used, what amount you’re looking to finance and your credit history.
At the dealership
Much like with buying a car, there are financing options available at dealerships. This can work in two ways: dealers generally either work with preferred lenders that offers loans to RV buyers or they finance “in-house.” Often known as “buy here, pay here” dealers, they may be one path to getting guaranteed RV financing.
Such dealerships are known for hefty fees and high interest rates — bad credit RV loans may carry rates as high as 20.95% and require a down payment of 10% or more (“bad” credit in this case is a credit score of 550). Those with excellent credit, on the other hand, may qualify for rates as low as 5.49% and zero money down. Online lenders may offer even lower rates, as low as 4.29%. We’ll talk more about banks, credit unions and online lenders next.
Through a bank or credit union
There are many banks and credit unions that offer RV and other recreational loans direct to consumers. However, they’ll almost certainly require a credit check. But that doesn’t mean that there aren’t lenders willing to work with your credit history — some, including USAA, are willing to work with lower credit scores. In addition, if you have a history of working with a particular bank or financial institution, you might be more likely to get approved there.
From an online lender
For those open to alternative lenders, there are online lenders who might be willing to approve you, although that doesn’t mean that you’ll escape a credit check or even high credit requirements. There are sites, including NoCreditCampers, that say they work with every type of credit, connecting buyers with third-party lenders as well as RV sellers who provide owner financing. Again, such third-party lenders may provide financing in exchange for high APRs and fees.
Types of RVs available
Before you dive into looking at loans, you’ll want to know a little bit about the types of RVs available. You’ll need to know the type of RV you’re considering since some lenders will only finance certain RVs (dependent on factors like type and year) or certain loan amounts. You’ll also want to factor in whether you’re buying new or used for your borrowing process.
RVs come in lots of shapes and sizes, and can include trailers as well. With motor homes, you’ll find several classes or types. These are the three main types or classes with typical price ranges:
|A||$60,000-$500,000+||Built on special chassis; 21-40 feet; sleeps up to 6|
|B||$60,000-$130,000||Sometimes called camper van; built on van’s chassis; 16-22 feet; sleeps up to 4|
|C||$43,000-$200,000+||Looks like passenger truck in front; generally recognizable by sleeping area over cab; 21-35 feet; sleeps up to 8|
Here are a few other common options you might see while shopping:
|Travel trailer||$8,000-$95,000||No engine; needs vehicle to pull trailer; 12-35 feet; sleeps up to 10|
|Fifth-wheel trailer||$18,000-$160,000||Require specially equipped heavy-duty pickup to tow; easier to attach and detach than traditional trailers; 21-40 feet; sleeps up to 6|
When you shop for an RV, you might want to consult the National Automobile Dealers Association or another organization for reviews, pricing and more.
Alternatives for financing an RV
If you can’t find a guaranteed RV loan you’re comfortable with, you might want to look at some alternatives.
Home equity line of credit: With a HELOC, you’re borrowing against the equity of your home (in a manner similar to using a credit card), which can be calculated by subtracting the mortgage from the value. Your home is the collateral for the loan, though, so you should always be cautious. You can typically borrow between 80% and 90% of the equity in your home, which might still not be enough depending on the type of RV you’re purchasing. With a HELOC, you borrow during a draw period, only paying back interest at that point. Once you enter the repayment period, you begin to make payments against the balance. It’s worth noting that it will almost always require a credit check, though, and a score of 680 will likely be needed to qualify.
Personal loan: While they might come with higher interest rates, personal loans can be used for any purpose, including an RV purchase. However, if you’re looking for a personal loan that also doesn’t require a credit check, beware of high-APR predatory lending and payday loans or title loans. Many personal loans have a maximum that might be less than you need, so consider that as well when looking into personal loans.
Consider buying used or renting: Just like with used cars, you can sometimes get more value out of pre-owned RVs. Save on depreciation and look into a pre-owned RV — you could get a great deal if you buy a more affordable RV with cash. Or, consider renting an RV to make sure that you’re really ready for the long-term commitment of ownership. Rent-to-own options are also available, and might not require a credit check.
The bottom line
If you’re worried that your credit score might hold you back from your RV purchase, know that this isn’t just any purchase. If your credit isn’t great, your best bet to get approved for an RV is to save up a large down payment, or to consider getting an older model that you could buy with cash. You will almost certainly pay more in interest than those with good credit, and while that’s true of borrowing across the board, it will be especially true of a luxury purchase like this.
In your eyes, an RV means a lifetime worth of memories for your family. But to a bank, you’re buying a high-dollar, ever-depreciating asset. In addition to the upfront costs, you’ll put lots into the hidden costs of owning an RV, including maintenance and gas.
So, before you take the plunge and make this big purchase, be sure that it’s something that can be easily balanced with your other bills and financial responsibilities. If you think it’s for you, make sure that it’s something that works for your lifestyle and budget before getting into a situation that could hurt your credit and financial situation.
The information in this article is accurate as of the date of publishing.