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Camper Financing: Getting Your First Motorhome

04/08/2020

The UK is an ideal country for investing in a motorhome or an RV. For starters, you can use it to see beautiful land routes and campsites. From Culzean Castle in Scotland for breathtaking beach scenery to Rhandirmwyn in Wales for some fishing and hiking, from Ten Acres in Devon where you can do a wine tasting to Cornwall if you love surfing, or Peak District National Park for nature lovers – Britain is full of wonderful spots to travel to with a motorhome!

Image of a motorhome parked at night in a camping site in Oregon, United States

Photo by Blake Wisz on Unsplash

Aside from offering memorable travel experiences to outdoor-living enthusiasts, motorhomes are chosen by many families as a permanent residence. According to the NCC, an estimate of one million caravan and motorhomes are currently in use in the UK. This number continues to rise as living in a motorhome is less expensive than living in a traditional house.

Many people are also using a motorhome, or RV, for their own business: mobile pet-grooming, a pop-up café, a travelling food truck, etc. There are just plenty of investment opportunities you can take with a recreational vehicle. The downside is that purchasing an RV is probably the second most expensive purchase you will make, after your home. That is why it is crucial to understand and figure out a financing solution.

If you already have plenty of cash lying around, then you’re good to go. On the other hand, if finances are tight at the moment, camper financing may be your only chance of getting that new RV. In this post, we are going to look at the ins and outs of camper financing and provide you with an overview before you start shopping for your new motorhome.

What is Camper Financing?

Camper financing is a type of long-term loan that you can use to purchase an RV like a camper, motorhome, or travel trailer. With the price of good quality and reliable RVs can range around £20,000 to £40,000, many buyers rely on some form of financial aid to make their purchases.

Several institutions offer camper financing. You can get an RV loan through RV dealerships that have financing arrangements with some lenders. You can also get a camper loan through several banks, credit unions, and online lenders. Financial institutions also offer loans for both new and used RVs.

Like many auto loans, RV loans also use the vehicle itself as collateral. If you fail to make your repayments, the lender could take and repossess your camper. The bright side of it is that you likely won’t need to put up any additional insurance to secure financing.

Some lenders also offer unsecured personal loans, which means that you don’t need any asset or property as collateral. However, this could result in higher interest rates and fees. You can also get an RV loan if you have bad or lower credit scores, but lenders may consider you as a higher risk.

Remember that RVs are luxury items, and creditors are wary about lending money for luxury items because they’re unnecessary in times of financial crisis. They may have to check factors like your income, employment history, and previous debts.

Camper financing terms generally range between 10 to 15 years, but some extend to up to 20 years. Most lenders also offer flexible financing terms for new and used RV loans and refinancing. It can include a shorter financing term with higher repayments, while others may want a longer-term with lower fees.

The Route To Financing Your Motorhome

Like any loan, you will need to consider some essential factors before jumping into new debt. To ensure a smooth purchase and secure a reasonable rate. Here are a few crucial things you can prepare before applying and getting an RV loan.

1. Budget

Before getting a loan, you’ll need to determine how much you’ll need first. You can get a low-end pop-up camper for as low as $5,000, while a high-end motorhome can cost as much as $500,000. To make a reasonable purchase, figure out the type of RV you want to purchase and can afford.

To figure out what type of RV suits you, there are essential things you need to consider. First is the size that fits your purpose and lifestyle. If you want it as a secondary home or business site, a bigger size is a reasonable option. However, for weekend trips, a smaller, less expensive option is the right choice.

You should also familiarise yourself with the mechanic. Certain parts may have phased out if you opt for an older model. Repairs are expensive as well, so if you end up getting an old RV, you may want to know how much you will need to fix these issues. Even new ones may have problems as well. It’s best to prepare for any trouble you might face.

You should also check other costs like fuel, annual maintenance, utility, road tax, camping and storage fees, and insurance. These costs may pile up in addition to your monthly loan repayments. It’s also essential to know the RV’s gas mileage and age. You will need to provide these pieces of information to any lenders before they allow you to apply for a loan. Make sure that your budget will allow you to buy and keep the RV.

2. Save a Down Payment

Once you decide the budget and type of RV you want to purchase, you’ll need to save for a down payment. Most RV companies require a deposit of at least 10% of the actual price of the vehicle, while others may require up to 20%. Remember that if you provide a higher down payment, you’ll have lesser monthly payments. You will also have the chance to qualify for lower interest rates.

3. Check Your Credit Score

You should also know your credit score before getting an RV loan to determine what kind of rates your lenders might offer. Lenders use credit scores to identify your trustworthiness and level of credit risk. A credit score around 700s or higher will likely help secure the best rates.

You can request your credit report from each of three major credit reporting agencies – Equifax, Experian, and TransUnion – for free once every twelve months. It’s smart to request a credit report before applying for a loan as they may contain inaccuracies and inconsistent information.

If you spot an error, immediately request a dispute from the agency. You won’t know in advance which of your reports your lender will use when evaluating your loan application, so make sure that any information is accurate to avoid jeopardising your loan process.

4. Decide The Type of Loan

You will need to consider what type of loan you want to get to finance your RV. You can decide on a secured vehicle loan as they have lower interest rates and borrowing limits. The loan process is also smoother even if you have a below-average credit score. However, your RV will serve as collateral, and your lender can take the vehicle if you don’t repay the loan as you have agreed.

Unsecured personal loan, on the other hand, is not protected with any collateral. Typically, you will need a high credit score for this type of loan. Unsecured loans also offer higher interest rates as they can’t take your RV if you fail to make repayments. However, the lender can take actions, such as taking the borrower to a court or commissioning a collection agency to collect the debt.

If you are unsure, keep in mind that the age, cost and type of motorhome will play a significant role in determining the best credit option that suits you. Some lenders will only accept newer models, typically less than two years old as collateral. If you want a former RV model, it should be around seven years old and pass a vehicle inspection check.

5. Compare Your Options

The last step you should take to finance your camper is to evaluate and compare offers from multiple lenders to get the best rates and save money every month. The most important things to consider are interest rates or annual percentage rates, balloon payments, and monthly repayments. Generally, the ideal loan option is the one with the lowest interest rate, APR, and loan term with monthly payments within your budget.

The Takeaway?

Buying an RV is like buying a home or a car. Hence, it is crucial to get the right type through a reputable lender. Make sure that you also do enough research and compare rates that you can afford and sustain to enjoy your vacations across Britain’s fantastic campsite and routes.

This article was written by Lauren Cordell, a leading credit expert and personal finance writer. She is a traveller with two and a half decades of experience in the credit industry. She specialises in credit reporting, financing, credit scoring, debt eradication, and budgeting. Lauren also loves to take adventures with her two kids through hiking and camping across Britain’s best terrains as a recreational activity.

Disclaimer: this is a collaborative post.

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