How to finance an RV (Recreational Vehicle)

First Republic Bank
January 25, 2021

Recreational vehicles (RVs) evoke a sense of fun and freedom — and for good reason. These personal spaces on wheels can be a flexible home office or a vehicle for leisure and adventure, as a complement to your fixed home address. When friends and family climb aboard, you will share a lifetime of cherished memories.

As appealing as RVs can be, they can be quite expensive, so preparing for the cost is imperative, so you can stay on track with all your financial goals. Although basic campers may fit a budget traveler’s needs, elaborate motorhomes often come with steep price tags. It's also important to factor in extra expenses, such as special amenities and high insurance premiums, as well as necessities like generators and propane tanks that you may have to buy separately.

For many, the path to RV ownership starts with financing. And with various options available, deciding on the right financing choice for your unique needs is essential.

How much do RVs cost?

Depending on the make, age, model, size and features included, the price of an RV ranges dramatically, from $10,000 to $300,000. Your dream vehicle may require spacious and separate rooms, a fully equipped kitchen, washer-dryer or an outdoor entertainment setup. All will drive costs up.

Once you know the type of RV you’re after, determine the amount of money you're comfortable putting down on your vehicle. Then, factor in any must-have extras and recurring expenses, such as propane refills, maintenance and cleaning, as well as storage when it’s not in use.

Should you buy a new or used RV?

In the interest of economy, you may gravitate toward a pre-owned RV. They can be a great money-saving option, but there are some downsides to consider carefully. Used RVs may have structural wear and tear, which leads to maintenance costs that will come out of your pocket. Replacing things like toilets, tires and windows can set you back thousands of dollars, as can fixing water damage and mold issues. Before buying a used RV, be sure to check it out in person, and consider having it professionally inspected. If it passes muster, you can get an impressive bang for your buck.

On the other hand, a fresh-off-the-lot RV may be preferable. You can rest assured everything will be in mint condition, with no miles on the odometer, and you won’t need to upgrade amenities. It will also be under manufacturer warranty, so if anything goes wrong in that fixed time period, you’ll be covered.

Financing your purchase with an RV loan

After you’ve decided on the RV, determine your best financing option. One choice is an RV loan. These products are available from online lenders, banks, credit unions and RV dealerships.

To qualify for an RV loan, the lender will assess your credit reports and credit scores, income and debt-to-income-ratio. While they're similar to auto loans, RV loans tend to have more stringent qualification standards and are usually secured with the property, which acts as collateral. Smaller RV loans, though, may be unsecured. Repayment terms can last 10, 15 or even 20 years, whereas most auto loan terms are six years or less.

Types of loans for RVs: Secured vs. unsecured

For secured RV loans, the lender has the right to repossess the property if a certain number of payments are missed. Even if you’re confident about your financial circumstances, it’s smart to understand the contractual obligations of a secured loan so you can make an informed choice.

An unsecured loan can offer greater flexibility, since you won't have the inconvenience of having to put up collateral. Unsecured loans include personal loans, a personal line of credit or credit card.

What is the best way to finance an RV?

Outside of an RV loan, you can make the purchase with a personal line of credit (which is generally unsecured and you only pay interest on what you borrow), savings, a credit card or a personal loan. The right financing depends on your requirements and preferences.

A personal line of credit with a low Annual Percentage Rate (APR) — even better if it's a low fixed APR, so you can better plan the monthly costs of repayment without worrying about fluctuations in the interest rate — can be a compelling alternative to an RV loan. With it, you can purchase the RV from the available funds and only pay interest on the borrowed amount. This flexibility in timing--you can borrow the money as you need it, up to the line of credit amount, during the draw period--also may free up cash for any unanticipated RV expenses that may occur.

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.25% APR (with discounts).

If you just need a small financial bridge to make the purchase, a credit card can work, especially if it has a 0% APR introductory time period. As long as you pay off the debt within that period, which can be 12 months or even longer, there will be no financing fees. An important caveat: you can wind up with a debt too close to the card's credit limit, which can cause credit scores to fall.

To avoid interest, payments and debt entirely, you can use savings instead. While it’s the most straightforward and least expensive option, you’d need to be confident that pulling from your hard-earned savings fits your long-term financial goals.

Clearly, every non-RV loan option has its pros and cons, so weigh each before making a final decision.

Personal line of credit

Savings

Credit card

Personal loan

  • Set amount of money that can be borrowed over set period of time
  • Funds available during the draw period can be used to pay for additional RV expenses (e.g. modifications, maintenance, equipment purchases) and a range of other personal, non-RV costs you may have
  • Only pay interest on what you borrow
  • Low interest rates
  • Least expensive option
  • No payments
  • Must have significant amount in savings
  • Can lead to potential cash flow issues if the exact sum is not budgeted for
  • Ideal for low priced models or down payments
  • Credit limits ranging from $5,000 - $10,000
  • Potential credit damage when charging large sums
  • Comes with additional fees and variable interest rates
  • Small loans can be right for financing cheaper RV models, since limits tend to be lower
  • Tend to be unsecured, so  collateral is not at risk
  • Set payment terms
  • Fixed and varied interest rates available
  • Interest assessed on entire loan and built into payments
  • Interest rates can be high, especially if credit rating isn't excellent. Note that interest rates apply to the entire lump sum of loan, too.

Is it better to finance an RV through a dealership or a bank?

For an RV loan, you can go through the dealership or pursue one from your own bank. If you’re looking for speed, a dealership’s financing can be attractive, since the representative will help you with the paperwork and approval process while you’re onsite.

Still, taking an RV loan out directly from a bank has benefits. If you don't have a relationship with a trusted financial institution already, doing so will help you establish one, which can give you access to financial experts who can guide you through your next financial goals, well beyond the life of this specific loan. If you already have a positive relationship with a bank, you may qualify for rates and terms that are more favorable than what the dealership can offer.

Financing with a dealer

When you finance an RV purchase through the dealership, the representative will submit your application to several banks, then walk you through the options, including the APRs, terms, payments, fees and final financing costs. If you qualify, you may be approved same-day, so you can drive off with your dream RV.

Financing with a dealer might mean multiple credit checks, but your credit scores are probably safe. Most scoring systems count these types of multiple inquiries as one, so they won't negatively impact your credit score

Other downsides to dealership financing do exist. For example, the lenders the dealership use may not offer the lowest interest rates available, and they may tack on assorted and surprise fees.

Financing with a bank

Although the prospect of walking into a dealership and leaving with an RV can be attractive, it's critical to evaluate all of your financing options. The amount you borrow may easily be tens of thousands of dollars over many years. Every interest rate point counts.

You'll want to get the lowest interest rate from a trusted lender that is committed to excellent client service. Aside from ensuring the lowest APR, the bank may grant you the most flexible payment terms. Depending on the lender, a well-managed loan will forge or augment a valuable relationship that can pave the way to other low-rate credit products. Should you ever want to upgrade your car, renovate your home or refinance student loan debt, that history may work in your favor. If you’d like a personal line of credit (First Republic's Personal Line of Credit offers low fixed rates between 2.25% to 3.5% APR, with discounts¹) so you can manage your cash flow when you’re ready to make major purchases, your activity with the RV loan can help you qualify.

How do you refinance an RV?

If the RV loan you get does have a high APR, you may be able to refinance it for one with a lower rate later. Or perhaps you want to extend the term so the payments will be lower. Refinancing an RV isn't as common as it is for cars but the process is similar: find and apply for the best refinancing deal available based on your current credit rating and financial situation.

Bear in mind that RV loan refinancing isn't always easy. If you owe more than the RV is worth, the lender may require you to put enough cash down to balance out the negative equity. Origination fees or pre-payment penalties may also apply, so review offers and documents carefully.

Since refinancing can be troublesome and fee-laden, also consider a personal line of credit.  Borrowers can use the funds to repay high-interest debt at a lower fixed-interest rate, while taking advantage of the flexible payments and the ability to use the money for other household needs, such as minor home repairs.

Is it hard to get financed for an RV?

Good credit is usually necessary for RV financing, so prior to applying you’ll want your credit scores to be high. There should be plenty of positive information on your consumer credit reports for a credit scoring system, such as FICO, to calculate. You will also need enough available income to make the payments without trouble.

Before approaching a bank or a dealership, pull your credit reports so you know you're in strong financial standing. A long history of using a variety of credit products, sending all payments on time and keeping credit inquiries to a minimum should result in impressive credit scores. FICO scores range from 300 to 850, and scores in the mid-700s and above are considered excellent.

Each lender has its own requirements, but highly qualified borrowers are more likely to be approved for a personal line of credit (or other forms of RV financing) with attractive terms.

Finance an RV with a Personal Line of Credit

Buying an RV can be an exciting long-term enhancement to your home space. After all, you’re preparing for years of travel, leisure and adventure with your loved ones, with the flexibility to set up an office right in your backyard, when you need a retreat from your daily routine. Pursue the RV that suits your style and budget, conduct extensive research on models and amenities, and ask experienced people in the RV community for advice.

Choosing the right financing option for you and your longer-term goals will prevent you from paying more than you have to in high interest costs or hidden fees. If a Personal Line of Credit with First Republic sounds like a fit for your holistic personal and household needs, calculate your rate to find out how you can plan for your RV as well as your next big milestone.

 

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.25% APR (with discounts).

1. Annual Percentage Rate. Rates effective as of 06/15/2020 and are subject to change.

Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and 3) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account.

Personal Line of Credit consists of a two-year, interest-only, revolving draw period followed by a fully amortizing repayment period of the remainder of the term. Draws are not permitted during the repayment period. Full terms of 7, 10 and 15 years available.

This product can only be used for personal, family or household purposes. It cannot be used for the following (among other prohibitions): to refinance or pay any First Republic loans or lines of credit, to purchase securities or investment products (including margin stock), for speculative purposes, for business or commercial uses, or for the direct payment of post-secondary educational expenses. This product cannot be used to pay off credit card debt at origination.

Personal Line of Credit minimum is $60,000; maximum is the lesser of $350,000 or debt to be repaid at origination plus $100,000. If no debt to be repaid at origination, the maximum loan amount is $100,000. Line of credit cannot be fully drawn at origination.

The terms of this product may differ from terms of your current loan(s) that are being paid off, including but not limited to student loans. By repaying such loans, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness, and you may not be able to re-obtain such benefits if this loan is refinanced with another lender in the future.

Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.

Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker to open account. This is not a commitment to lend; all lending is subject to First Republic’s underwriting standards. Applicants should discuss line of credit terms, conditions and account details with their banker.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.

This information is governed by our Terms and Conditions of use.