RVing is a quintessential American pastime. It’s also expected to get more popular in coming years as Baby Boomers storm into retirement and drive up RV sales. In fact, just this year, the RV Industry Association is expecting manufacturers to ship 438,000 brand-new RVs—18,500 more than last year.
If you’d like to snag one of these new RVs for yourself (or even a used one), chances are you’ll need an RV loan. But how long can you take out an RV loan for? What affects the term length you’ll get for your RV loan? And what effect does having a longer term do to your wallet?
We’re going to answer those three questions, and more, right now.
1) How long can you take out an RV loan for?
The absolute max that you can take out an RV loan for is up to 20 years. However, you can only get these long-term lengths with certain banks. Most RV loans are more commonly doled out in 10-year blocks. RV loans with longer terms have lower monthly payments but they are more expensive in the long run. Choose the shortest term you can afford to reduce the overall cost of the loan. Try SuperMoney’s loan offer engine to see what terms you qualify for?
2) What affects the term of your RV loan?
There are three main factors that lenders look at when determining how long you can take out an RV loan for. Each lender is different and may use some or all of this criteria in determining your RV loan length. So, if you’re looking for a specific loan length, it pays to shop around.
First, most lenders will look at the size of your RV loan. The bigger the loan, the more time you’ll get to pay it off. For example, you can get an RV loan for up to 144 months from Partners Federal Credit Union—but only if you’re taking out a loan of at least $75,000, according to Tina Endicott, VP of Marketing and Business Development.
Next, lenders will look at the type of RV you’re taking out a loan for. Specifically, they’re checking whether it’s a new or used RV. You can take out a longer loan with many lenders if you’re financing a new instead of a used RV.
Finally, your credit score may dictate how long of an RV loan term you can take out. For instance, people with poor credit are limited to loans of 75 months or less at Partners Federal Credit Union, says Tina Endicott.
Most lenders will allow you to choose the actual length of your RV loan term from a set of options, depending on the above three factors. For example, the online RV lender Lightstream offers “loans between $5,000 to $9,999 for 24 – 60 months, while loans between $10,000 to $100,000 are available for 24 – 84 months,” according to Todd Nelson, business development officer of Lightstream, another online lender.
3) What happens if you take out a long-term RV loan?
It’s generally best to take out the shortest loan term possible for your RV loan amount. No one wants to be in debt longer than they have to. Besides, wouldn’t you want to fully own your RV sooner rather than later?
Paying off your RV loan in the shortest amount of time also has a lot of other benefits—mainly, it’s a lot cheaper over the long run. The reason why is twofold: you’ll be paying less interest with each passing month, and you’ll also qualify for lower interest rates by taking out a shorter-term loan.
Let’s look at an example of two different loans to see how much you’ll pay each month and over time.
- Long-term loan: $100,000, over 144 months, at 4.69% APR (Annual Percentage Rate)
- Shorter-term loan: $100,000, over 72 months, at 3.99% APR
The long-term loan will have a monthly payment of $909.42, compared to the shorter-term loan at $1,564.06. It sounds like the long-term loan is the better deal because it costs $654.64 less per month, right?
Now, let’s look at the interest costs over the life of the loan. You’ll pay a total of $12,612.52 over the course of six years with the shorter-term interest loan. That’s a lot, but nothing compared to the long-term loan: a whopping $30,995.93. That’s almost a third of the cost of the entire RV itself!
How to find an RV loan term that works for you
The best way to get the best loan for you is to shop around. Specifically, look for lenders who can give you a quote with a soft credit pull—these will not damage your credit score. After you narrow down your choices, you can allow potential lenders to perform a hard credit pull. This will limit your credit score from tanking if you shop around with many potential lenders (which is wise).
SuperMoney makes it easy with its loan offer engine. Fill in one short form and you’ll see what rates and loan offers you prequalify for with leading lenders in a matter of minutes. This will not hurt your credit and there is no obligation to go ahead with the loan application.