Buying a recreational vehicle, also known as an RV, is a significant expense, one that ranges anywhere from $35,000 to $1 million or more. Many people turn to RV loans to help finance such a large purchase.
Available through online lenders, banks, credit unions and even some RV dealerships, the application process for an RV loan is similar to an auto loan application. However, RV loans provide larger amounts of cash than typical auto loans, and the qualification requirements are often slightly more complex.
What you need to know before getting an RV loan
RV loans are a type of long-term financing used to purchase a motorhome, travel trailer or camper. While they are not auto loans, RV loans do have some similar features. Like an auto loan, for instance, the vehicle is used as collateral for the loan.
“An RV loan is typically a simple interest loan, similar to an auto loan, generally with longer terms,” said Scott Greene, head of marine and RV lending for Truist.
Typically, RV loans offer repayment terms of one to 15 years, but some lenders may even offer repayment timelines of as long as 20 years. Though borrowers who can afford to make higher payments may opt for shorter terms.
Before applying for an RV loan, you’ll need to know how much money you want to borrow and generally need to have identified the RV you are seeking to purchase, said Greene.
What you need to qualify for an RV loan
Because RVs are considered luxury items and involve lending a significant amount of money, the qualifications for RV loans are generally stringent, often similar to qualifying for a mortgage.
“To qualify for an RV loan, a borrower generally needs a continuous source of income and good credit history–typically including evidence of satisfactory repayment of a similar size and type of debt,” said Michael Lax, executive vice president and head of RV marine sales for Bank of the West.
Credit score
As with applying for any type of consumer borrowing, a solid credit score is an important part of your qualifications. Lenders use credit scores to gauge your level of credit risk or likelihood of repaying the loan. Credit scores in the mid-700s or higher typically secure the best rates.
“Most lenders require a FICO score of 680 and above. However, some specialty lenders will allow FICO scores below 680,” said Lax.
Before starting your application, check your credit reports with all three credit bureaus–Experian, Equifax and Transunion–so that you know your score in advance. That way, you can take any steps needed to improve it. A free copy of your credit report from all three bureaus is available once every 12 months from AnnualCreditReport.com.
Income
When applying for an RV loan you’ll need proof of sufficient income to repay the monthly loan payments and all of your other existing debt, said Greene.
“Consumers also need to understand the additional RV expenses that are outside of the monthly RV loan payment,” said Greene. “For example; additional fuel costs, physical damage insurance and storage expenses–if not at the home.”
While the ability to pay these additional costs is not part of a lender’s considerations during the application review process, it’s important to understand the full scope of expenses when considering whether you can afford an RV.
Use the Bankrate personal loan calculator to help determine how much you can reasonably afford.
Credit history
While credit history requirements may vary by lender, having a solid track record of borrowing and responsibly repaying your debts is important.
Lightstream, for instance, looks for several years of credit history and credit history with various account types. This can include major credit cards, installment debt and mortgage debt if applicable. Good payment history with few delinquencies or challenges in repaying debt is also important.
Lender-specific requirements
Additional application requirements typically vary by lender and are lender-specific. Because RV loan applications tend to be more stringent, some lenders require tax returns, financial statements and detailed credit history.
“Some lenders may require proof of income, proof of assets, proof of residency, or how the RV will be utilized,” said Greene.
How to apply for an RV loan
RV loans are offered by banks, online lenders and even RV dealers. To apply, you must complete an application, which will be reviewed and evaluated by the lender. It’s a good idea to obtain quotes from multiple lenders to ensure you get the best interest rate, loan terms and repayment timeline for your needs.
“If you are purchasing from a dealer, it’s best to work with the dealer who has access to several lenders and can match you with the right lender for your specific circumstances,” said Lax.
If you’re working directly with a lender, you can sometimes apply and get pre-approved for funding in advance of shopping for your RV so you know how much money you have available to spend.
Once you’ve decided on the RV you want to purchase and have completed the loan approval process, you sign a loan agreement outlining the loan terms. Depending on the lender, the funds may be deposited into your account as soon as the next day.
Bottom line
Whether you’re buying a new or used RV, there are many lenders who offer financing. But getting approved can be as complex as applying for a home mortgage, so determine in advance exactly how much you need to borrow and that you have the income and credit score to support a successful application. It’s also a good idea to shop around to multiple lenders to get the best deal for your needs.