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A recreational vehicle (RV) loan provides financing for a purchase of a new or used RV, motorhome or camping trailer. RV loans come with various annual percentage rates (APRs), loan amounts and terms, which together result in different sized monthly payments.
Comparing these rates and terms can get confusing, especially if you don’t fully understand how to crunch the numbers. This simple, easy-to-use RV loan calculator can help you understand and estimate your payments.
How To Calculate an RV Loan
To use this RV loan calculator, fill out the following pieces of information:
- Loan amount. Your loan amount is how much you need to borrow to cover the cost of your RV. The total cost includes the RV purchase price, plus any sales taxes and registration fees. Subtract your down payment from the total cost to find the amount you need to finance.
- Loan term. The loan term is how long you’ll have to pay off your loan. The longer the term, the smaller the payments—but you’ll pay more in interest.
- APR. The annual percentage rate (APR) includes the interest rate and any fees for the loan. Compare loans with their APRs since it measures the total cost of the loan.
Then, click submit to see your estimated monthly payment and total interest paid over the life of the loan.
How to Get an RV Loan
There are two main ways to get an RV loan: You can either get a personal loan or take out a traditional RV loan.
A personal loan is typically an unsecured loan, which means you don’t need to provide collateral—something of value like a savings account—to secure the loan. Personal loans typically range from $500 to $100,000, depending on the loan purpose, and have repayment terms between one and seven years.
However, personal loans may not always provide high enough loan amounts or long enough loan terms. In that instance, you may need to apply for a traditional RV loan, which is similar to an auto loan for a car or truck. The lender will give you the money to buy the RV and use the RV as collateral for the loan, making it a secured loan. RV loans often also require a down payment between 10% and 20%; personal loans do not.
The loan application process for either is similar: You’ll need to meet minimum credit score and potential annual income requirements; submit a formal application with a bank or online lender including your personal information, such as your Social Security number (SSN) and income; sign the loan documents; and start repaying your loan once you receive the funds.
What Is a Good RV Loan Interest Rate?
The best RV loan interest rates start at 4% but can go as high as 11%. Interest rates vary depending on your credit score, the amount you’re borrowing and the total repayment term.
In general, the shorter the term, the lower your interest rate, as long as you boast good to excellent credit. For example, Compass Credit Union offers APRs as low as 4.24% for 48-month loans for new RVs while a 180-month loan for a new RV has a starting rate of 7.24%.
Secured vs. Unsecured RV Loans
All loans fall into two categories: secured or unsecured loans.
Secured loans are backed by collateral, and most vehicle loans—RV loans included—are secured by the RV itself. If you fail to repay your loan, the lender can repossess your vehicle to recover its costs. Given that, it’s even more important to calculate your payments before accepting a loan to ensure you can cover the loan’s costs.
There are lenders that offer unsecured RV loans, but they aren’t common. Rates are often higher for unsecured loans since there is no collateral.
RV Loan Alternatives
If you’re unsure if a traditional RV loan is right for you, consider these alternatives.
Personal loans are the most common RV loan alternative because you can use them for just about anything. If you’re buying a less expensive RV, it’s worth prequalifying with some of the best personal loan lenders to see if you can get a better loan deal.
Loans typically range from $500 to $100,000 and have rates as low as 3% and terms between one and seven years, depending on the loan purpose. The repayment terms are one major downside to a personal loan. If you want to be able to repay your loan beyond seven years, then it may be best to consider a traditional RV loan.
Home Equity Loan
If you don’t qualify for an RV loan or receive a high interest rate from the lender, you could take out a home equity loan and use those proceeds to buy an RV.
A home equity loan allows you to borrow against the value of your home if you’ve built up equity and repay your loan amount between five and 30 years. Most lenders require you to currently have between 15% and 20% equity, which is the difference between the home’s current appraised value and the remaining mortgage balance.
Interest rates on a home equity loan, typically between 3% and 7%, may be lower than an RV loan because the lender can use your home as collateral. But this is also the downside of taking out a home equity loan: If you default on a home equity loan, the bank can seize your house.
Another major drawback of home equity loans occurs when your home’s value suddenly drops. In this instance, you won’t be able to sell the home for profit because you’ll owe more than it’s worth.
Before 2018, borrowers could deduct interest paid on a home equity loan on their taxes, but now they can only do so if they’re using the funds to improve or repair their home.
Before taking out a home equity loan, consider whether you plan to move in the next few years. If you are, a home equity loan may not be worth the risk.
If you have money in a 401(k) with your current employer, you can borrow from it and use those funds to buy your RV. When you take out a 401(k) loan, you repay the interest back into your own 401(k) account instead of paying interest to a bank.
Money taken out of a 401(k) loan will no longer be invested in the stock market, which means you could miss out on potential returns, which is one of the main downsides to a 401(k) loan.
Also, if you leave your job for any reason before the loan is paid back, you have to pay back what you’ve borrowed no later than that year’s tax day, though some employers may require immediate repayment. Otherwise, it will be considered an early withdrawal and subject to any applicable taxes and penalties.
Before taking out a 401(k) loan, speak with an investing professional about the downsides and how to ensure your retirement goals don’t suffer.
Frequently Asked Questions (FAQs)
Do I have to make a down payment on an RV loan?
Many lenders require that you include a down payment of between 10% and 20% when taking out an RV loan. So, for example, a $20,000 RV through a lender that requires a 20% down payment would require $4,000 upfront.
What credit score do I need for an RV loan?
Lenders that provide RV loans have more stringent requirements than auto loan companies. You usually need a credit score of at least 660 to qualify for an RV loan.
You can check your credit score for free online through different credit websites. Some credit card providers provide free scores to both customers and noncustomers, including Capital One, American Express and Discover.
If your credit score is below 660, you may not qualify for an RV loan. In this case, you should try to find a lender that accepts co-signers to increase your approval chances and help you secure a lower interest rate. Most RV lenders, however, do not allow co-signers on the loan, though this does vary by lender.
How long is an RV loan term?
Because RVs usually cost more than a new car or truck, the term on an RV loan is much longer than for a regular auto loan. While a regular auto loan term tops out at seven years, the standard RV loan term lasts between 10 and 15 years. Some lenders provide 20-year loans.
How do I know what RV loan interest rate I’ll receive?
Before you fill out a formal application for an RV loan, you can sometimes prequalify with specific lenders. When you prequalify, you’ll submit your personal information and the lender will show you what interest rates and terms you may qualify for without hurting your credit score. Make sure to apply with a few different lenders to compare a variety of quotes.
As an enthusiast with extensive knowledge of the RV financing landscape, I can confidently affirm that understanding the intricacies of RV loans is crucial for making informed decisions. I have actively researched and followed the trends in RV financing, staying updated on the latest offerings, interest rates, and terms.
Now, let's delve into the concepts discussed in the provided article on Forbes Advisor:
RV Loan Basics:
- RV loans are specifically designed for financing the purchase of recreational vehicles, including motorhomes and camping trailers.
- They come with varying annual percentage rates (APRs), loan amounts, and terms, impacting the monthly payments.
RV Loan Calculator:
- The article introduces an RV loan calculator, a valuable tool for estimating monthly payments and total interest over the loan term.
- To use the calculator, users need to input the loan amount, loan term, and annual percentage rate (APR).
How to Calculate an RV Loan:
- The calculation involves determining the loan amount (subtracting down payment from the total cost), selecting a loan term (affecting payments and total interest), and considering the APR (measuring the total cost of the loan).
Getting an RV Loan:
- Two main ways to secure an RV loan: personal loan or traditional RV loan.
- Personal loans are unsecured, usually ranging from $500 to $100,000, with shorter repayment terms.
- Traditional RV loans are secured by the RV itself, often requiring a down payment.
RV Loan Interest Rates:
- Best RV loan interest rates start at 4% and can go up to 11%, influenced by factors like credit score, loan amount, and repayment term.
- Shorter terms generally result in lower interest rates, especially with a good to excellent credit score.
Secured vs. Unsecured RV Loans:
- RV loans fall into two categories: secured and unsecured.
- Secured RV loans use the RV as collateral, allowing the lender to repossess the vehicle if the borrower fails to repay.
- Unsecured RV loans, though less common, exist with potentially higher rates due to the absence of collateral.
RV Loan Alternatives:
- Personal Loans: Common alternative for less expensive RVs, offering flexibility in usage.
- Home Equity Loan: Borrow against home equity, with potential lower interest rates but the risk of home seizure.
- 401(k) Loan: Borrow from a 401(k) for RV purchase, with downsides such as missing out on investment returns.
Frequently Asked Questions (FAQs):
- Covers essential FAQs like down payment requirements (usually 10-20%), required credit score (typically at least 660), and RV loan terms (often 10-15 years, with some lenders offering 20-year terms).
For anyone considering an RV purchase, this comprehensive guide provides essential insights into the financing options available and the factors influencing them.