RVing is a quintessential American pastime, and with the rising trend of #vanlife, its popularity has only grown. Just last year, RV manufacturers shipped 504,599 brand-new RVs—17% more than the previous year. If you’d like to jump on the wanderlust bandwagon, you’ll probably need to take out an RV loan.
But how long can you take to pay off your loan? What factors affect the length of your loan term? And how will a longer term affect your wallet?
How long can you take to pay off your RV loan?
The maximum length of an RV loan for is 20 years. However, you can only secure these long-term lengths at certain banks. Most are doled out in 10-year blocks.
Word to the wise: longer-term loans have lower monthly payments, but they’re more expensive in the long run. To reduce the overall cost of your loan, choose the shortest term you can afford. You can check out SuperMoney’s loan offer engine to see what terms you qualify for.
What factors determine your RV loan term?
There are three factors that lenders consider when determining the length of your RV loan term:
First, lenders will look at the size of your RV loan. The bigger the loan, the more time you can take to pay it off. At Partners Federal Credit Union, for example, you can apply for terms up to 144 months — but only if you’re taking out a loan of at least $75,000, says 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, whether it’s new or used. Most lenders will offer longer loan terms if you’re financing a new vehicle.
Finally, lenders will look at your credit score. The better your credit, the longer you can take to pay off your loan. At Partners Federal Credit Union, for instance, borrowers with poor credit are limited to loans of 75 months or less.
Most lenders will allow you to choose the length of your loan term from a set of options based on the above three factors. Every lender has different priorities, so if you’re looking for a specific loan length, it pays to shop around.
Also, don’t forget about insurance for your RV as well.
Should you choose a short-term or long-term?
It’s generally best to take out the shortest loan term possible for your RV loan amount. Shorter terms yield lower overall costs, and pave a shorter path to full RV ownership.
There are two reasons why shorter-term loans are less costly. First, because rapidly eroding at your total debt owed means paying interest on a lower and lower balance. And second, because taking out a shorter loan term will qualify you for lower interest rates.
For example, a lender might offer you rates of 4.69% on a long-term (144 month) loan of $100,000. That same loan, if paid off over a 72 month term, might cost you only $3.99% APR.
The long-term loan will have a monthly payment of $909.42 — much lower than the shorter-term loan at $1,564.06. But over time, those numbers will flip. Six years down the line, the short-term loan will have set you back $12,612.52, while the long-term will have cost a whopping $30,995.93.
How to find an RV loan term that works for you
The best way to find the right loan for you is to shop around. Look for lenders who can give you a quote with a soft credit pull to avoid hurting your credit score. After you narrow down your choices, you can allow your chosen lender to perform a hard credit pull.
Need help? SuperMoney makes it easy to find the right lender for you, without putting your credit at risk.
Lindsay is a recent college graduate living in Fort Collins, CO. She taught herself how to manage her money after a series of bad encounters with student loans, low-paying jobs, and a house from hell. Today, she’s working hard to pay off her debts, earn more money, and find her dream job as a wildlife biologist. You can find her work on many financial sites like Magnify Money, Credit Sesame, and Centsai.