Bad Credit RV Loans
Are you looking to buy an RV but don’t have the money to pay for it out of pocket? Like cars, motorcycles, houses, and many other things, there are loans available to help you in financing these purchases. It is quite unrealistic for most Americans to be able to pay for these large purchases without any help. Thankfully, loans allow people to pay for things they would normally not have access to. While taking on debt should always be avoided if you can, taking out a loan to buy your RV is likely your only financing option.
Loans for RVs are widely available, even to those with bad credit. If you have poor credit, a bad credit RV loan can help you enjoy your own RV in no time! Let’s take a look at what exactly an RV loan is so you can get a better understanding of how they work and if you should apply for one.
What is an RV Loan
Think of an RV loan like an auto loan. Like auto loans, most RV loans are secured loans. This means that you will have to put something up as collateral, just in case you cannot pay for the loan. In many cases, the collateral you will put up for an RV loan will be the RV itself. If you take out an RV loan from a lender and you then buy the RV, your lender has the right to take possession of your RV if you cannot pay for the loan. This might seem like it is unfair to the borrower, but most lenders will require you to do this, especially if you have bad credit.
Like mortgage, boat loan, auto loan, and many other types of financing, an RV loan is an installment loan. This means you will be paying your loan off in equal installments, with a set amount of interest, over a set period of time. For example, you could have a 10 year long installment loan where you make payments every single month for 10 years, or 120 payments in total. The terms of each installment loan differ, and they can oftentimes be negotiated with your lender to come up with a repayment plan that is best for you.
You will also need to make a down payment when financing your loan. This means that you pay for a certain percentage of the RV purchase while your loan covers the rest of it. The amount you have to put down for a down payment varies, but you can expect it to be anywhere from 10%-20% and could be even more if your credit is poor. Down payments are often required because it shows your lender that you have the means to make payments. It also makes you put some skin in the game so to say. If you are putting up a large amount of money for a down payment, you are more likely to pay your loan back because you will lose that large down payment otherwise.
If you are thinking about financing an RV loan, make sure you have the means to pay for a down payment. You do not want to be blindsided by a huge payment and then have to proceed to pay your loan back as well.
An RV or motorhome is obviously larger than car, and therefore is usually more expensive. RVs can be anywhere from $10,000 to 1 million dollars. The more expensive the RV, the more expensive the loan will be. Likewise, the more expensive your RV loan is the longer your loan terms will likely be. The typical RV loan will be about 10-15 years in length and will have a lower monthly interest rate than something like a small personal loan would.
You now know all about financing an RV loan, but how does this work if you have bad credit? What even is bad credit? Let’s take a look at what good credit and bad credit is.
Good and Bad Credit Profile
Your “credit” is short for your creditworthiness, or your ability to pay back loans and lines of credit (like credit cards). If you consistently pay your loans back successfully, you will have good credit or perhaps even excellent credit. If you are always making late payments or are not paying back your loans, you will have bad credit.
Every time you apply for a loan or a line of credit, RV lenders will want to check your credit. They want to see your ability to pay off your loans. If you have a history of struggling to pay back your loans, they will be less likely to give you loan approval, or they will charge you a higher interest rate. If you have a good history, they will be more happy to loan you money and will offer lower interest rates and more room to negotiate your loan financing terms.
When you make a loan payment or repay your line of credit, your lender will usually report these payments to the 3 main credit bureaus; Experian, TransUnion, and Equifax. This information on you is collected and compiled into your “credit.” There are two main aspects of credit:
- Credit Report: According to the Consumer Financial Protection Bureau, “A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.” In other words, your credit report is a long report that covers everything there is to know about your credit. When potential lenders want to take a deep dive into your credit to see if you can be trusted to pay back your debts, they will look at your credit report.
- Credit Score: Your credit is automatically compiled into a 3 digit number by credit bureaus. This number is meant to represent your creditworthiness. Lenders will use this number to quickly make a decision on whether to lend to you or not. Poorly managing your debts will cause your score to drop, while consistently properly paying off your loans and lines of credit will result in your score increasing. Here’s what makes up your score.
- Payment history (35%): Your payment history is the most important factor in your FICO Score. Lenders want to be sure that you can make your payments on time. If you have consistently made on-time payments to previous lenders, you will likely be able to make your payments to them.
- Credit utilization (30%): The second most important factor in your FICO Score is how much of your available credit you’re using. If you’re using a large portion of your overall credit, lenders may perceive you as being overextended and at risk for defaulting on payments.
- Length of credit history (15%): Lenders want to know the average age of all of your credit accounts, the age of your oldest and newest accounts, and when you last used your accounts. Showing consistency over the long term is important for demonstrating your ability to be consistent going forward.
- Credit Mix (10%): There are different types of credit. Most credit accounts fall under one of two major categories: revolving or installment. Revolving credit accounts include credit cards, retail cards, and lines of credit. Installment accounts include things like auto loans, personal loans, and mortgages. Lenders like to see that you’ve demonstrated an ability to manage different types of credit accounts.
- New credit (10%): Every time you open a new credit account, it shows up on your credit report. Opening too many new accounts over a short period of time may mean that you’re taking on more than you can handle. This could mean that you’re at risk of defaulting on your payments to them.
Your credit score ranges anywhere from 300-850, with 850 being the best score you can achieve. While each lender has different standards of what is good and bad credit, it is a general consensus that any score under 670 is a poor credit score. Anything around this score will likely result in your loans having more interest and less favorable terms.
If your credit score is in this range and you are looking to get an RV loan, you are not out of luck. Let’s take a look at where you can get a bad credit RV loan.
Where Can I Get an RV Loan?
When your credit score is poor your options become a little more limited. Not every lender will be willing to give loans to someone with bad credit, but there are still some that do. Let’s take a look at some of your financing options for obtaining an RV loan with bad credit.
- Banks and Credit Unions: Banks offer a wide variety of loans to their customers. As such, there are many household names of banks that can offer RV loans. These banks often have stricter loan terms, especially for those with bad credit. Your local bank also may offer an RV loan to you and you may find more relaxed loan terms here. Similarly, credit unions can also offer you a loan for your RV. Here’s a few banks and credit unions that can help with your RV loan needs:
- Wells Fargo
- US Bank
- Bank of the West
- Alliant Credit Union
- SunTrust Bank
- Online Lenders: If your bank does not offer you an RV loan or you simply are not happy with the strict terms they are offering you, an online lender could be a good alternative. Compared to banks and credit unions, online lenders are generally more willing to offer loans to and work with borrowers with poor credit. However, online lenders have less of a trustworthy reputation, so you want to make sure you pick your online lender carefully if that is the path you want to take. You also may be paying additional fees for the online service, so be aware of all potential costs before you get your loan with these online lenders. Here’s our three picks for online lenders.
Pros and Cons of an RV Loan
By now, you now know a lot about RV financing loans options. Let’s take a look at the pros and cons of an RV loan so you can weigh the options of an RV loan before getting one.
- Access to an RV: Getting a loan allows you to buy an RV you may have never been able to buy. Repaying and worrying about loans is not ideal, but if you have your heart set on buying an RV, a loan gives you the ability to do so.
- Manageable Payments: While it can be unfortunate to have to pay off an RV loan for upwards of 15 years, this makes each monthly payment fairly manageable. With longer loans comes smaller interest rates, so your monthly payments could end up being fairly simple to pay off.
- Builds Credit: Many smaller personal loans and traditional payday lenders give you loans that don’t build your credit when you pay them back (Possible does!). Because RV loans are larger personal loans, you can repair your bad credit by paying your RV loan back on time and in-full.
- High Down Payment: Since RVs tend to be expensive, your down payment might be fairly large. If you think you will be struggling to make monthly payments, financing a down payment can be very difficult.
- High Interest Rate: If you are getting an RV loan with bad credit, you can expect a high interest rate on your loan, which can make financing this loan quite expensive over the long run.
- Putting Up Collateral: Since most RV loans are secured vehicle loans, you will have to put something up for collateral, whether it be your RV you are buying or something else. Making payments with the threat of losing your collateral can be extremely stressful.
- Long Repayment Loan Term: While having a long term loan can make each of your payments more manageable, it can be extremely frustrating to have an RV loan looming over your head for upwards of 15 years.