What Are The Requirements for an RV Loan?

What Are The Requirements for an RV Loan?

Recreational vehicles, also known as RVs, offer flexible and convenient travel options to explore parts of the country you’ve ever seen before. But before that, they are a significant investment for anyone looking to purchase an RV. While there are many options available, one of the best paths for purchasing is to sign up for an RV loan. Being that RV loans are designed to cover such a sizable purchase, the process of having your RV loan approved is slightly more complex than an auto loan.

What Do You Need to Qualify for an RV Loan?

Being that obtaining an RV loan can be complicated, it is important to understand what you, as a buyer, will need to qualify for these loans.

 

Credit Score

When it comes to qualifying for an RV loan, credit score is one of the most important factors. Most lenders will require a credit score of at least 680 or higher. 700 and up is even better. This is considered a good credit score and shows that the borrower is financially responsible and able to handle debt. However, some lenders may be more flexible with credit scores, and may offer loans to borrowers with lower scores.

 

Borrowers with lower credit scores may still qualify for RV loans, but you should be prepared to pay higher interest rates and fees. Lenders see borrowers with lower credit scores as higher risk, and therefore charge more to offset that risk.

 

Optionally, you could take steps to better your credit score before applying for an RV loan. Paying your bills on time, reducing credit card debt, and working with a credit counselor can get you back on track and ready to pay off your RV.

 

Source of Income

In addition to credit score, lenders will also want to ensure that you has a steady source of income and can afford to make the monthly loan payments. This means that borrowers will need to provide proof of income, such as pay stubs or tax returns. Lenders may also consider the borrower’s debt-to-income (DTI) ratio when deciding whether or not to approve a loan. The DTI ratio is a measure of the borrower’s monthly debt payments (auto loan, mortgage, alimony payments, etc.) in relation to their monthly income. A lower DTI ratio (35% and below) is generally seen as more favorable by lenders.

 

If you have a higher DTI ratio, it does not necessarily mean that you are exempt from receiving a RV loan. However, your RV loan terms may be more rigid and require you to pay more per month.

 

Down Payment

Depending on the lender and the borrower’s credit profile, a down payment may be required. The amount of the down payment can vary, but it’s typically between 10% to 20% of the purchase price. For example, if an RV costs $100,000, the down payment would be between $10,000 to $20,000. The purpose of a down payment is to reduce the amount of the loan and lower the risk for the lender. Borrowers who can make a larger down payment may secure better loan terms, such as a lower interest rate.

 

Keep in mind that you can always pay more than the minimum down payment and afford yourself a shorter loan period or less costly monthly payments.

 

Insurance

Most lenders will require you to have comprehensive insurance coverage on the RV throughout the life of the loan. This is to protect the lender’s investment if that the RV is damaged or destroyed. In other words, you will need to provide proof of insurance to the lender before completing the loan application. Optionally, your lender can choose a full coverage policy for you. However, if your lender purchases a plan for you, the premiums are often higher and liability coverage is minimal at best.

 

To give you some idea of what to expect, the average annual premium for a Class A motorhome is between $2,000 and $4,000. For a Class B camper van or conversion van, the premium is between $1,000 and $2,000.

 

Collateral

There are secured and unsecured RV loans. Should you opt to apply for a secure loan, you will have to use collateral. The RV itself will typically serve as collateral for the loan. This means that if you default on the loan, the lender can repossess the RV to recoup their losses.

 

For used RVs, to ensure that it is free and clear of any liens or encumbrances, the lender may require a title search and lien check. This is to make sure that there are no other parties who have a claim on the RV.

 

Shopping Around for RV Loans

As mentioned earlier, the requirements for RV loans can vary depending on the lender and the specific loan program. This is why it’s important for borrowers to shop around and compare offers from multiple lenders to find the best RV loan for their needs. By doing this, you can find a loan that offers favorable terms and fits within your unique budget. Be sure to check out online lending institutions, banks, and even credit unions to see what is available to you.

 

In addition to comparing loan offers, borrowers should also consider working with a reputable lender, like Atlantic Horizon Capital. A reputable lender will be transparent about their loan terms and fees, and will work with the borrower to find a loan that fits their needs. They may also offer pre-approval, which can help streamline the buying process and give you more negotiating power.

 

Finance the RV of Your Dreams Today

RV loans can be a great way for buyers to finance the purchase of a luxurious RV without having to pay for the entire cost upfront. However, to qualify for an RV loan, borrowers must meet specific requirements, including credit score, income, down payment, collateral, and insurance. Working with a reputable lender can also make a big difference when it comes to RV loans, which is why you should contact Atlantic Horizon Capital today.

 

The team at Atlantic Horizon Capital works with you to come up with a customizable RV loan, so you can get on the open road in your new motorcoach faster. Our loans and interest rates are also highly competitive. Start your online application today or give us a call to see if you are pre-approved at 609-365-1540.

The Complete Guide to Financing An RV

The Complete Guide to Financing An RV

Now that you are ready to purchase an RV, you need to understand how to finance the vehicle. You might think they are similar to car or truck loans, but they are slightly different. You can finance through the dealership, but you will not get the best terms or rates. Atlantic Horizon Capital has created this guide to help you make the right financing decision for your RV.

Types of RV Loans

There are two types of loans for an RV: secured or personal. A secured loan will use the RV as collateral to guarantee the loan. The lender can repossess the vehicle if you cannot make those monthly payments. With these terms, the lender has some guarantees about the loan. In many cases, if you have good credit, then you can expect a lower interest rate.

A personal loan is not backed by any type of collateral. However, these loans are riskier for traditional banks and lenders. For that reason, online lenders typically offer these loans. In some cases, the interest rates are higher. While that may be a problem for some borrowers, you can still secure a great rate for your RV loan with the right lender.

Can you buy an RV with an auto loan? If you want to buy an RV with these types of loans, you need to think again. Since recreational vehicles are more expensive than cars or trucks, you will need a larger loan. RV loans have a more in-depth underwriting process than standard vehicle loans. Additionally, lenders will look at other factors for the loan, such as net worth, cash flow, and liquidity. In many situations, these factors are not considered with an auto loan.

Who Offers These Loans?

As previously mentioned, you do not need financing from a dealership. You can find online lenders, credit unions, or banks for these loans. Banks and credit unions will offer secured loans, while online lenders specialize in personal loans. Online lenders can provide you with faster funding, but some traditional loans could be a better option to secure a lower rate.

Interest terms can vary. You may get an interest rate of 4% if you have good credit. Sometimes, you may be expected to pay interest rates as high as 17% with poor credit. Generally, most RV interest rates fall into the 4% to 10% range.

Speaking of credit scores, many lenders will require the borrower to have a score of at least 690. Keep in mind that these requirements can vary depending on your lender. Other factors will determine your RV loan’s terms and interest rates, including your debt-to-income ratio, employment history, and income.

Down Payment for an RV Loan

Down Payment for an RV Loan

The total down payment percentage is based on the RV’s selling price before the title, tax, license, and loan processing fees. The amount of the down payment will vary from lender to lender. Typically, you can expect to put down at least 10% of the vehicle purchase price for a down payment.

Like buying a car, a new RV will depreciate as much as 20% when it leaves the dealership’s lot. With a long-term loan, you could owe more than it is worth. For that reason, you will want to make a bigger down payment on your next RV purchase.

Many of these RV loans have longer terms than a typical car loan. Since the price of a new or used vehicle is higher, many buyers can get longer terms to make the payment more affordable. Generally, the average RV loan will range from 10 to 15 years, but some lenders can even extend these terms for 20 years or more. Like any type of loan, if you can get terms for two to five years, you will pay less interest for the life of the loan.

RV Loans and Insurance

Many times, lenders will require proof of insurance to release the loan. However, some lenders will waive these requirements. You can get a loan without insurance, but it is essential to carry full coverage insurance. In the event of an accident or loss, the insurance company will reimburse you. In many states, it is a requirement for the vehicle to be insured. Always check with your local laws to see what is needed to drive your vehicle down the street safely and legally.

Titles, Registration, Taxes, and Loan Processing Fees

If you want to finance your title, taxes, registration, and loan processing fees, it is possible with some lenders. Financing these fees must meet your lender’s loan-to-value (LTV) guidelines. While most lenders prefer that you pay for these fees out of pocket, they are willing to help finance these costs.

The Next Steps

Knowing the basics of RV financing allows you to find the best rate for your needs. RV loans can be complicated to understand, but with the right amount of research, you can finance that next big purchase. One of the biggest challenges is knowing what you can afford. Most lenders recommend keeping the RV loan to less than 25% of your income. Without knowing your budget, you could be stuck making big payments for many years to come.

Along with financing, there are other costs associated with RVs. Always think about maintenance. RVs will have plenty of ongoing costs after the initial purchase. Plus, insurance rates can be higher for those vehicles. You will want to consider those factors when it comes time to purchase and finance your vehicle. All these costs can add up when you are buying an RV.

There are many ways to finance your next RV purchase. Usually, these loans have higher requirements for approval than a standard auto loan. You will want to work with a lender that specializes in these types of loans and can get you an excellent rate for your vehicle. At Atlantic Horizon Capital, we offer personal loans so that you can make these purchases. If you would like to learn more information about our RV loans, reach out to us.