For those who are looking to buy a new RV, you have just made a life-changing decision. However, in line with that big decision comes certain problems such as financing. And just like when you buy a new car or a new home, you would need to do your research well when it comes to financing your new RV. So, how do you avoid bad RV financing?
If you want to avoid bad RV financing, avoid buying on impulse, and make sure that you are doing your research first. Don’t go for financing with zero down payment because you are going to get hampered by ridiculous interest rates and high monthly payments. A good credit score will help as well.
Buying an RV is not all about just choosing the type of RV you want but it also boils down to the financing as well. After all, you want to make sure that you are getting a good deal for your RV, or else you would end up getting hampered financially if you ended up getting your RV on a ridiculously bad financing scheme that would ultimately make you want to regret getting that RV.
Is RV financing hard to get?
The RV life can be a good way of living out the rest of your days because of how it allows you to travel around the country on something that is basically your house. This is great for those who have already retired and are looking to enjoy a good retirement on the road while traveling around the country. That is why you might want to think about getting an RV.
But, when it comes to getting an RV, you’d have to buy it on credit in case you don’t have enough disposable cash to throw around. That is why you’d have to get your RV financed if you want to be able to secure that dream RV of yours. This is basically similar to when you would buy a car or a house as you would probably need to get them financed for you to be able to buy them.
However, is RV financing actually difficult to get? In most cases, getting your RV financed can be quite a challenge. It is actually a lot more difficult to get approval for an RV loan than it is to get a new car financed. And, in some cases, getting a new RV financed might even be just as difficult as qualifying for a home mortgage.
The reason why it is difficult for you to get an RV loan is that most lenders are usually so meticulous when it comes to looking at your history and financial capabilities. They tend to look at a number of factors such as debt-to-income ratio, employment history, and income. These are some factors that car lenders won’t always look at but will matter a lot for RV loans. Hence, that is why it is actually quite challenging to get yourself approved for an RV loan.
How can I get RV financing with bad credit?
As we mentioned, a lot of lending companies actually make it difficult for you to get approved for an RV loan especially when your credit history isn’t really that good. In a sense, it would be much more difficult for you to get approved for an RV loan if you have a bad credit score because of how risky it is on the part of the lender to finance your RV purchase. So, in that case, how would you be able to get your RV financed if you have a bad credit score?
1. Get preapproved by the lending company
First things first, if you get yourself preapproved by the lending company for an RV loan before you get to the shopping part, it would be easier for you to negotiate for a good financing scheme with the RV dealership if you show them that you were already preapproved for your loan. This will give you more leverage to bargain for a good financing scheme that won’t end up hampering you in the long run.
There will be some lending companies that will actually approve an RV loan even if you have bad credit. However, they will most likely give you a bad deal that will involve crazy interest rates. Still, getting preapproved can be a good way for you to get your RV financed before you even shop for one. From there, you should focus more on making sure that you minimize the chances of you paying ridiculous amounts for your regular RV payments.
2. Pay a large down payment
Even if you do have a bad credit score, you may have some disposable cash that you could use for your down payment. As much as possible, see to it that you pay a large down payment because that will make it easier for you to get approved for your RV loan especially considering that the monthly payments you would be making are now lower. This will convince both the dealership and the lending company that you are worth the approval.
As early as possible, save for your down payment even if you do have a bad credit score. Avoid spending money months or even years before making the decision to buy an RV so that you would be able to have more money set aside for your down payment. Most RV dealerships will require you to pay 10% of the purchase price as a down payment but you should try to pay at least 20% of the price if you want to get a good loan on your RV. Of course, the larger the down payment, the lower the monthly payments and interest rate you will end up paying in the long run.
3. Act on improving your credit score
Of course, the best thing you can do to make sure that you get approved for RV financing is to actually improve your credit score months before you decide to apply for an RV loan and go shopping at a dealership for an RV.
There are plenty of ways you can do so such as paying any pre-existing credits you have while paying your bills on time. Also, avoiding credit cards or using any of your credit cards can also improve your overall credit score. As long as you are doing your part to improve your credit score, you will be able to have a higher chance of securing an RV loan while avoiding bad financing.
What kind of credit score do you need to finance an RV?
In case you did not know, FICO credit scores range from 300 to 850. Of course, a lower credit score means that you have bad credit. Naturally, a higher credit score means that you are more likely to get approved for RV financing.
Here is the range of what your credit score means:
- Excellent credit: 740 to 850
- Good credit: 680 to 740
- Acceptable credit: 620 to 680
- Subprime credit: 550 to 620
- Poor credit: 300 to 550
If you have a credit score that is over 700, you would most likely be able to secure a good RV financing scheme with a good interest rate that won’t end up killing your finances in the long run. Of course, credit scores above 600 may still be good enough for you to get an acceptable deal for your RV.
There will still be dealerships that will end up approving RV deals for those with bad credit scores. However, they will most likely hamper you with ridiculous interest rates that will ultimately make it difficult for you to keep up with the payments. As such, it would be best to avoid getting an RV if you have poor credit, or else the interest rates will be crazy high.
What is a good interest rate for an RV loan?
So, now that we have talked about interest rates and what they mean for those who have good credit scores, what then would be a good interest rate if you want to get an RV loan?
For those with good credit scores that are over 700, they will most likely get the lowest interest available depending on the lending company. Some lending companies allow a low-interest rate of about 3% while most other companies usually offer low interest rates of somewhere between 4% and 5% for those with good credit scores.
However, if you don’t have the best credit score and you are somewhere between 600 and 700, you may still be able to get a good interest rate for your RV loan. There is no exact number on what a good interest rate is but being able to get financed for your RV while paying interest rates of somewhere between 5% and 10% would already be acceptable for those who don’t have the best credit scores.
On the part of those who have bad credit scores, they may end up seeing interest rates that are north of 15% or even somewhere above 20%. This should be avoided at all times because of how you would end up paying interest rates that will eventually be more than the actual value of the RV itself.