After the interest rate, the length of the term is the second biggest factor in determining the cost of an RV loan. Terms typically range from two to seven years. While a longer term might tempt you to keep your monthly payments as low as possible, it could mean you end up paying thousands, or even tens of thousands of dollars more over the life of your loan.
General RV Loan Terms
RV loan terms typically range from two to seven years, although you can also find RV loans for as long as 20 years. It all depends on the total cost of the vehicle, your finances, and the lender you deal with.
Longer loan terms (15-20 years) tend to be limited to larger RV models, as some RVs can be in the same price range as smaller homes, and many buyers want a loan term similar to a mortgage.
Factors that Affect RV Loan Term
The following factors play a significant role in the length of your loan repayment tenure:
- Loan amount. Lenders typically limit how large a loan amount can be for a longer RV loan term.
- The condition and age of the RV. Just like cars, RVs depreciate over time. In fact, some models can lose more than 25% of their value after just the first three years. To mitigate risk, lenders often limit terms based on the age of the model.
- Your credit score. The higher your credit score, the more term options you’ll be offered. If your score is low, lenders may view you as a higher risk and offer you a shorter term.
- Type of lender. Dealers often offer longer repayment terms than personal loan lenders like banks, credit unions, and online lenders. While these lenders offer terms between two and seven years, dealers may offer repayment terms of up to 20 years.
- Your desired monthly payment amount. A longer repayment term often means lower monthly payments, but you also end up paying more interest over the life of the loan than if you chose a shorter repayment term.
How to Choose an RV Loan Term
The longer the repayment term, the more interest you pay over the life of the loan, even if the interest rate is lower. For example, if your $50,000 RV loan has a 7.99 percent interest rate, you’ll pay over $16,000 more on a 10-year repayment term than on a three-year term.
| Monthly payment | Total Interest | |
|---|---|---|
| 3 years | $1,567.00 | $6,397.15 |
| 5 years | $1,014.00 | $10,814.83 |
| 7 years | $779.00 | $15,441.18 |
| 10 years | $606.00 | $22,764.86 |
For higher-interest loans, the difference is even larger: A $50,000 loan with a 17.99 percent interest rate would cost you about $15,000 in interest over three years. Stretch the term to seven years and you’ll pay more than $38,000.
If you are buying a more expensive model, it is advantageous to choose a longer term, as it will make your monthly payments more manageable. Similarly, if you need some extra space on your budget, extending your loan term is wise.
That said, RVs, like cars, depreciate in value, so while a longer repayment term might make it easier to pay off the loan, you also run the risk of letting your loan go underwater — meaning you owe more than the property is worth and your equity goes down.
That could make it difficult to refinance your loan, or even sell your RV for enough money to pay off the remaining debt, if that becomes necessary.
How to Financing an RV
To get an RV loan, follow these steps.
- Check the credits. Knowing your credit score can help you choose the right lender to apply for a loan with, as different lenders have different credit requirements for approval. That said, the higher your score, the better terms and interest rates you can secure.
- Compare lenders. To ensure you get a low interest rate and reasonable monthly payments, compare RV loans, which will allow you to estimate your monthly payments and see what loan terms you qualify for.
- Pre-qualification. Once you’ve found a few lenders you like (at least three), see if they offer pre-qualification. Pre-qualifying for an RV loan is a quick way to see available rates and terms without affecting your credit score. First, fill out a short application, providing some details such as your name, estimated annual income, monthly rent or mortgage payment, Social Security number, and date of birth.
- Buy an RV. Since you likely already know what type of RV you want to invest in, getting pre-qualified for a loan will give you a negotiating advantage when you visit the dealership.
Conclusion
RVs are depreciating assets and, like cars and trucks, will lose value over time. If you take out a loan for too long, you may have trouble paying off the loan. Also, owing more than your RV is worth could put you in a tough financial situation.
That’s why you should always choose the shortest repayment term that comfortably fits your budget. You might have to readjust your budget or choose a cheaper model, but it will be worth it in the long run to avoid overpaying.
