The best way to get a great RV loan rate is to actively start working on it from the very first moment you begin to think about purchasing an RV. After all, the most impactful element of your loan rate could take time to fine tune, like your credit history or debt to income ratio.
Your creditworthiness is more than your Credit Karma score, (which is not a completely accurate representation of your FICO score) which lenders use as one component of your creditworthiness.
Lenders look for previous bankruptcies, your debt-to-income ratio, payment history, whether your income is verifiable, and of course, your credit score. If your debt-to-income ratio is high, work on paying off some of your debt. If you have a previous bankruptcy that will fall off your credit report in a year or two, consider waiting on your RV purchase until your credit report is cleaned up. The same can be said for a history of late payments. The further back those negative events are, the better.Lenders Use More than Credit Scores
You can still get RV financing with a low credit score and some negativity in your credit history from some lenders. But the better your score and credit history is, the easier it will be, and your terms and interest rates will reflect your improved creditworthiness.
To qualify for a better RV loan rate, you’ll need to purchase an RV that is 10 years old or newer, and if it has a gas motor the odometer will need to be under 60,000 miles. If it has a diesel engine the milage will be restricted to 100,000 miles or less. Good Sam will finance RVs that are 11 or 12 years old, but they charge a higher interest rate for those older RVs, and Good Sam requires a minimum 700 FICO score.
Generally speaking, a larger loan on a shorter term will result in lower interest rates but those variables are only part of the calculation. You also need to fit the new debt into your budget and lifestyle and a quarter point of interest may not justify shortening the term from 10 years to 5 years, especially on a large loan. The difference between a 4-year term and a 20-year term at Good Sam is less than one percentage point of interest (on loans from $50,000 to $2,000,000) but the difference in your out-of-pocket monthly payments would be huge. As an example, on a $150,000 loan (with 20% down) the 20-year loan would cost roughly $750 monthly, while the 4-year loan with the lower interest rate would cost over $2,600 monthly. Over the life of the loan, you’d pay less than $10,000 in interest on the 4-year loan, but you’d pay over $50,000 in interest on the 20-year loan.
It’s interesting to look at these figures but the bottom line is what can you afford in your budget. Additionally, most people who secure a long-term loan on an RV don’t really intend to pay off the loan since most people do not keep their RVs for 20 years. However, you need to be mindful that if you don’t keep it long enough, you could be in a negative equity position when you get ready to trade it in or sell it.
Another way to get the best RV loan rate is to increase your down payment. That reduces the amount to be financed letting you opt for a shorter term and the associated lower interest rates that short term loans offer. Additionally, a larger down payment reduces the lenders risk, which might also result in lower interest rates.
One last strategy for getting the best RV loan rate is to separate the extended warranty from the purchase agreement. It may be simpler to combine these charges but in the long run you’ll end up paying monthly on the extended warranty for years after it expires. Also, you’ll be paying interest on the extended warranty since that extra expense increases the total amount to be financed. This subject has been extensively discussed in RV forums and it might be worth reading more about it, if you’re tempted to finance an extended warranty. A better strategy would be to reduce your down payment enough to pay for the extended warranty separately, at the time you purchase the RV. You won’t be paying for the warranty after it expires, nor will you pay for interest on a service to which you no longer have access.
Finally, to get the best RV loan rates, shop for financing from various lenders. As stated in the beginning of this article, each lender sets their own polices, so shopping for the right lender could save you a bundle. However, you should be mindful of how many credit applications you submit since each one will negatively impact your credit score. If your score is teetering on the brink of good or excellent you might not want to push it to the lower level, with too many credit applications. Alternatively, you could use a loan broker to help you find the best RV loan rates. If you’re buying an RV from a dealer or from National Vehicle their finance department can help you find the best lender for your RV, your credit history, and your budget.
Many factors can affect interest rates for RV loans.