When many people begin looking for an RV or motorhome, they can be surprised at how much it can cost. It is worth noting that there are many different types of motorhomes, and prices will likely reflect the make and model.
Buying a motorhome is therefore considered a large investment. So, when you are shopping around for a motorhome, you will also need to consider financing options. For those who are about to buy their first motorhome, it is important to understand how motorhome loans work and the potential challenges that can accompany financing the purchase of an RV.
With that in mind, here are 5 things that you will need to know before you look around for a motorhome loan
1. The Motorhome May Be Collateral
As with many things, a motor home loan is secured against the vehicle itself. This means that the RV or motorhome can act as a guarantee; if you fall behind with monthly repayments your lender can repossess your motorhome.
If you are opting for an unsecured motor home loan, you won’t have to put up an asset or property as collateral. However, this may make the loan riskier and the lender may charge higher interest rates for it. Auto Finance Online can help you choose the most suitable loan type for purchasing your motorhome if you are finding making this choice difficult.
2. Different Lenders Offer Different Loans
It is possible to get a loan from the dealer who is selling you the motorhome, but you may not want to finance your motorhome this way. Some credit unions, online lenders, and even banks can offer loans to help you purchase a motorhome. Be sure to compare options from multiple lenders to ensure that you get the most affordable loan possible for you.
3. Qualifying Can Be Tough
Much like qualifying for a mortgage or a car loan, it can be tough to be approved for a motorhome loan. A motorhome loan will involve a background check into your debt-to-income ratio, your general income, and your employment history. Like most loan checks, if you have a lack of income or a rocky history with debts, this can prevent you from being approved for motorhome financing options.
4. Interest Can Be Pricey
There is a range of motorhome loan rates, also known as APR and these can range from just over 4% to 18%. The rates vary based on several factors, such as the lender, your credit history, the amount borrowed, how much of the deposit you can put down, and how long the loan is going to be taken out for.
Just as with a car loan, the amount of interest you pay will be affected by the length of the loan time.
5. The Overall Cost May Be More
You will likely need to make a down payment to qualify for a motorhome loan, and some lenders will recommend putting down as much as 20%. It is worth noting that motorhomes are an asset that will depreciate, so it can be worth investing in a motorhome that is not top of the range. Some motorhome providers and lenders do not need a down payment, but this may mean that you could end up owing more on the loan than the overall cost post a motorhome.