Posted on: December 7, 2021
Written by: Peggy Dent
In fact, there’s an entire segment of the banking and finance industry that specializes in financing used RVs. These lenders set their own policies, restrictions, and rates, but there are some commonalities throughout the industry. Generally speaking, RV lenders set limits on the age of the RV, (and if it has an engine) they limit the mileage.
Most RV lenders will only underwrite loans on vehicles that are 10 years old or newer. Gas motorhome generally have a mileage limit of 60,000 miles and diesel engine have a mileage limit of 100,000 miles. Is this a hard and fast rule across the entire industry? No. Good Sam underwrites RVs that are 11 or 12 years old, but they charge an extra .25% higher interest rate for older vehicles. Alliance and GreatRVLoans will finance some RVs up to 15 years old, but the majority of RV lenders prefer to underwrite 10 year or newer RVs.
The bottom line is that every lender must balance their risk against the potential future income they hope to gain from a loan. The greater the risk the more income they need to generate to offset the risk. To generate more income, lenders may require a larger down payment (so the borrower has “more skin in the game”) or the lender may raise the interest rate and/or restrict the term (number of months) of the loan.
Therefore, the age and mileage of the RV are not the only criteria lenders consider when evaluating a loan application. The RV’s brand, type, size, intended usage, and location, are also considered. A used inexpensive truck camper or pop-up trailer will qualify for one type of loan while an expensive van conversion or motorhome will qualify for a different loan. Lenders even apply different risks based on the manufacturer and the brand.
However, the features of the RV are not the only consideration that factor into a used RV loan. The use of the RV and the creditworthiness of the borrower(s) will also weigh heavily in a lender’s decisions about the terms and interest rates of a loan. Lenders will use the financed RV as collateral, but (like cars) RVs depreciate rapidly, so lenders need to be sure the borrower(s) can repay the loan within the specified term. Therefore, the creditworthiness of the borrower will greatly impact the loan’s approval and the terms of the loan. That creditworthiness is determined by the borrower’s credit history, credit score, debt to income ratio, income, previous bankruptcy, payment history, collateral, and unverifiable income.
Another factor that could challenge your ability to secure used (or even new) RV financing is your intended use of the RV. If you just want to use it intermittently you stand a much better chance of obtaining a loan. There are very few RV lenders that will underwrite an RV loan purchased for full-time use. First of all, the wear and tear on the RV is greater for full-timers so the RV will depreciate faster. Additionally, most full-time RV’s do not have a permanent address and without a permanent address, a lender could have difficulty reclaiming their collateral if the loan goes into default. The risk for underwriting full-time RVers makes the potential risk to reward ration too lopsided and most RV lenders chose not to take on that risk.
However, there are a few lenders, Good Sam being one of them, who will underwrite a used RV loan for full-time use, but the required down payment, loan term, and interest rates, will reflect that use. Additionally, the lender will require a much higher credit score and a near perfect credit history. They may also require additional collateral to secure the loan.
Many people who want to use their newly financed RV as a full-time residence will try to circumvent these requirements by using a relative’s address as their permanent address or by obtaining the RV loan before they sell their home. I strongly advise against these practices. You might qualify for a loan under these conditions, but it’s deceptive, and if the lender becomes aware of the deception, it could negate the loan, requiring an immediate pay-off or the reclamation the asset.
If you’ve found the perfect RV for your needs within the National Vehicle inventory, then simply ask their staff to help you find the right RV financing. This is one of the many services offered by National Vehicle. Alternatively, if you locate the perfect used RV on a dealer’s lot their finance team should be able to help you secure the right loan.
On the other hand, if you intent to purchase a used RV from a private party and need to do your own shopping for financing, do your due diligence. Most lenders like the ones listed below, have useful information on their websites. There you can find information about loan restrictions, terms, interest rates, down payments, and monthly fees, without actually applying for a loan.
Doing this investigation at the beginning of your RV search will help you understand how much money you will need for the down payment and how much the monthly payments could be on various loan amounts. This will clarify how much you can spend on an RV and still stay within your budget.
Then once you have a target RV in mind, you can apply for a loan from one or more of these lenders but be aware that when you apply for a loan, each application may have a negative impact on your credit score. If your credit score is teetering on the brink of Excellent vs Very Good, then multiple applications could push your score down to the lower category. It might be wise to ask from help from professionals like National Vehicle.
Used RV loans are available, but many variables will impact the down payment, terms, and interest rates. Therefore, you need to take your time, and do comprehensive research, so you know what to expect, and how to finance the perfect RV, once you find it.
Author: Peggy Dent is an author, writer, and full-time RVer, traveling around the US and Canada. She has driven more than 130,000 miles in a motorhome, and is currently writing for the RV industry.