The decision to purchase an RV is often accompanied by a lot of serious questions. What are the different models of RVs? What kind of RV would best suit the terrain I wish to travel in? Where can I buy an RV? How do I pay for it?
Of all the questions before you, the subject of finance is probably the most important. Because a recreational vehicle is such a considerable investment, you have to thoroughly assess your financial situation before making an informed decision.
Thankfully, we’ve put together some information on RV financing and why RV loans are a better option than paying cash.
What is RV financing?
Your budget is crucial in determining whether you will get financing or pay cash for your RV. How much do you have saved? How is your monthly income? Do you have good credit?
An RV loan is a type of long-term financing that allows you to purchase an RV with a down payment and pay the balance in installments over a specified period.
How do RV loans work?
RV loans work like regular consumer loans. You may get financing from a financial institution, an RV dealership, or an online lender. The lender provides the funds needed for the purchase, and then you agree to various terms that allow you to pay back with interest.
RV loans can either be secured or unsecured depending on the lender. Banks and credit unions typically offer secured loans. This means that the loan is backed by collateral, usually the RV.
The loan terms and interest rates of secured loans are also determined by the age and type of RV you intend to purchase as well as your credit score.
Conversely, online lenders are your best bet for unsecured personal loans. They provide more competitive rates and terms. Again, because the RV doesn’t serve as collateral, these terms are determined by your credit score and income.
When you’ve found a lender with the best rates and terms for you, you’ll fill an application, and if it is approved, you’ll sign an agreement and get your loan. It is helpful to know that RV loans have long terms, ranging from 12 to 240 months.
Is it better to pay for an RV with cash?
Not quite. There’s a reason why RV loans are so popular. They allow you to set a flexible budget and stretch out your repayment plan over an extended period. With cash payments, you’d need to wait until you’ve saved up a substantial amount, and only then can you purchase your dream RV.
Also, your choice of vehicle would be determined by how much you have, which can really restrict your options. Using up all your money on an RV will also leave you with nothing for the additional expenses bound to come up.
A way out
It is not advisable to spend all your savings on an RV. Instead, take a chunk of that money and put down a large down payment on your RV loan. When you apply for an RV loan with a large down payment, you’re more likely to receive lower rates, which can help you pay up in time.