Whether for summer vacations with the family, to live in, or the desire to make road trips feel more like home, a recreational vehicle (RV) is a great thing to have when you’re planning to hit the open road. But if you don’t already own one, purchasing an RV can significantly dent your wallet, as most vehicle purchases can.
For most people, buying a new or used RV requires financing from a bank, credit union, or another type of lender. Fortunately, there are many types of loans and lenders to choose from.
Here are some of the best dealership and private-party RV financing options to help you finance a motorhome, campervan, coach, caravan, fifth-wheel trailer, pop-up camper, or truck camper, to make your dreams a reality.
1. Obtain an RV Loan From a Bank or Credit Union
The majority of banks and credit unions offer traditional RV financing through secured loans, similar to auto loan options. Approval of an RV loan through a conventional financial institution will be based on various factors, including the age of the RV, your income, debt-to-income (DTI) ratio, expenses, credit score and history, and the amount of the loan requested.
For large recreational vehicle purchases, most financial institutions require a relatively strong credit profile and verification of regular earnings to get approved. You will also typically need to provide at least 10% down to obtain financing, which will also help lower your monthly payment.
New and used RV loans through a bank or credit union can be offered with a low interest rate, but how low will depend on your credit, and the length and amount of funds requested. Repayment terms will vary from bank to bank, but most range from two to twenty years and offer a fixed monthly payment.
This type of financing can be the quickest to obtain because you can work directly with the financing department at an RV dealer when you buy an RV through them. RV dealers typically have relationships with lenders or a network of loan providers, and can help you find an RV loan for your down payment, income, and credit, in-house.
But what if you don’t have a down payment and can’t wait to save one? Using your home equity is one way, if you have some, or taking out a personal loan might be a better option for you.
2. Use Home Equity to Purchase an RV
If you’re a homeowner, you may have another option for financing your new or used RV purchase. A home equity loan, home equity line of credit, home equity sharing agreement, or cash-out refinance loan may be better suited for you if you own a home outright or owe less on your mortgage than the property is worth.
Home Equity Loans & Lines of Credit
Home equity loans and lines of credit typically offer lower interest rates than what is available through a conventional RV loan, and repayment may be extended for a longer period. However, you must have a home with enough equity and decent credit to qualify.
Using your home equity may come with additional closing costs to establish the installment loan or line of credit that you should also calculate when considering these options. Also, your home is used as collateral to back the loan, not the RV, which could present real estate problems should you fail to repay in line with the terms of your agreement.
Home equity loan (HEL) and home equity line of credit (HELOC) closing costs are typically worked into the borrowed amount and are deducted at closing rather than you having to provide money upfront. However, that’s not always the case. Not all lenders require them, but you could pay slightly higher rates than expected when factored into the equation.
If you have money to put down, you may be able to put it toward reducing your interest rate and monthly payment by buying mortgage points rather than using it to reduce the total loan amount. You can also choose to do both.
Home equity loans and lines of credit can be great ways to finance an RV for someone with good credit who can also find a low rate and a zero closing costs offer, or someone who doesn’t have a lump sum to put down on a recreational vehicle. Home equity loans are typically fixed-rate products, while a home equity line of credit will likely have a variable annual percentage rate (APR).
Home Equity Agreement (HEA)
A home equity sharing agreement, often called an HEA loan, is another option for buying an RV. Unlike home equity loans and lines of credit, a typical home equity agreement allows you to receive money for a portion of your home’s future sales price without paying interest on a loan.
Similar to home equity loans and lines of credit, an HEA will likely require closing costs to be paid upfront or deducted from the proceeds. However, no additional funds are needed to close the transaction, and you don’t owe any money until you sell your home.
A HEA is best for people with a fair, poor, or bad credit score, those who don’t have money to put down on an RV or don’t want to, or those who want to avoid monthly payments. Similar to HELs and HELOCs, it will likely take a few weeks to close the transaction since the HEA company will go through the typical steps required to fully evaluate your property to determine its value and available equity. Apply for up to $500K with Unlock.
Cash-Out Home Refinance Loans
When you have equity in real estate, you can also refinance it to get cash out. A cash-out refinance loan can be an especially smart option if you can reduce your current mortgage loan interest rate at the same time.
Similar to other home equity lending options, you won’t likely be required to come up with a down payment but will probably have to pay closing costs, which you might be able to roll into the loan. It will also take a few weeks to obtain the proceeds while the mortgage lender evaluates your property and prepares the closing documents.
The interest rate to buy an RV is probably going to be the lowest with a cash-out refinance loan; however, if the interest rate for your entire mortgage goes up, that could offset the benefit.
You can also refinance your home even if the original mortgage has already been paid off.
3. Get a Personal Loan to Buy an RV
Typically, new and used RV financing options are limited to specialty bank or credit union loans and home equity products, given the amount required to purchase the recreational vehicle. However, we are going to share with you how to finance an RV with a personal loan as an alternative to those methods.
If you have good credit and income, you can also buy a recreational vehicle with a personal loan and get a great rate. But it’s more difficult to acquire loan amounts over $50,000. Personal loans of $100,000 or more aren’t unheard of, though.
Generally, you won’t need a down payment or collateral for a personal loan, but you might have to pay an origination fee of 1-12% of the loaned amount to cover the cost of processing it. You will be required to pay this fee upfront in cash or have it deducted from the funds. The percent you are charged will be determined by your creditworthiness and may include other factors.
One major downside to an unsecured personal loan is the term length. Repayment of the loan will be shorter than the other popular options, usually 2-7 years, which could mean a higher monthly payment. But you’ll own the RV outright and won’t need to worry about waiting for property evaluations and related documentation.
A personal loan can be a great option if you’re buying a small, inexpensive RV or a used one from a private seller and need the money quickly.
Final Thoughts on Financing an RV
To prepare for your RV purchase, take the time to understand what you can afford to borrow based on your debt, income, and expenses each month, and know how the financing option affects your current and long-term financial situation.
Before applying for a traditional RV loan, using home equity, or obtaining a personal loan, prepare to have money set aside to satisfy any down payment requirements or other out-of-pocket costs associated with your chosen financing option.
Lastly, don’t forget about taxes. There are a few tax deductions that could help with your purchasing decision. Just be sure to double-check with your tax professional to be sure they apply to your situation.
I hope you found this article on the “best ways to finance an RV” helpful. If you have a question, personal tip, or another comment, please don’t hesitate to send us a message. Happy RVing!