According to the Senior Vice President and COO of Utah-based Medallion Bank, Justin Haley, owning an RV is a change in one’s lifestyle. The industrial bank specializes in non-prime recreation loans and RV financing is one of the things that they offer. Getting an RV often results to years of doing monthly payments plus the travel-related expenses and cost in maintaining the vehicle itself.
To make RV financing worth it, one must make sure that it fits well with the budget and the overall routine. Slip-ups must be cleared before purchasing and RV and below are the common mistakes that must be avoided:
Taking the Price as It Is
The price of an RV is mostly inflated at a rate of as much as 30% to 35%. That’s according to Michelle Schroeder-Gardner who purchased a Class C RV back in July 2015 and also the founder of MakingSenseofCents.com.
Haggling is a reaction which most RV dealers expect of you. “After we’ve done some negotiations with the RV that we wanted, we were able to get as much as $30,000 off the original price and we were able to do so without doing much work,” Schroeder-Gardner said. “We just asked about the lowest price that they can offer and we were given a great price!”
Online dealership websites like RVTrader.com, RVs.com, and RVT.com offer prices and deals on RVs that are really great! Try checking these sites along with the others that you know to see the loan rates. Financing your RV purchase is a major investment.
Failing to Check Credit Score
Failing to check your credit rating is a common mistake that customers do when applying for RV financing, especially if you had issues in the past with bad credit and such. It works in the same way as a car loan so if you need to get an annual credit report for free, you can get it from myBankrate.
A credit score of 640 above is a good credit score. Something that is lower like 600 or 550 may get you qualified for a personal loan (sometimes referred to as a sub-prime Auto loan) but you will need to pay more! Every state has its own interest rate but those who have bad credit score can expect rates reaching up to 24%. It is way higher than the rates offered to those who have a score of 640 and up.
RV financing is almost the same as financing other types of vehicles. The main difference is that loans for RV purchase offer some options that are unique and are not available in a typical auto financing loan. For instance, you can place a claim that your RV is your primary residence or a secondary one. This would have a positive impact on the federal taxes that you pay and even add some deductions.
IRS has made it clear that vehicles having areas designated for cooking, sleeping, and a toilet can be declared as a residence. And if the RV is utilized as a security for the loan that has been used to purchase it, the interest in its mortgage can be deducted from the homeowner’s taxes. Just be sure to get a specialized insurance for your RV especially if it becomes a property on wheels rather than just a vehicle.
Overestimating What You Can Actually Afford
Customers are encouraged to have the overall cost of owning an RV included in any computation and not just its monthly payment. RVs definitely cost more to maintain than the regular vehicles. RV loans are more like a mortgage and less like a car loan.
Use BankRate’s calculator for personal loans for you RV loan calculation so you can estimate the payments that you need to do monthly including its interest together with the schedule for amortization. This can help if you’re considering financing your RV purchase.
- Grabbing The Loan That is Available First
Just like any other thing that requires a loan, it is unwise to immediately settle on the first one that you come across. This is true for every RV loan out there and you need to take note that the rates and duration isn’t like regular auto loans. The same thing is true to RV insurance.
There are RV loans that are set to a 20-year term which makes look more affordable than the actual price but much like any other loan, you shouldn’t take the first one that you encounter when looking to finance an RV.
Be sure to do some research both for RV loan rates and its insurance. Study how one differs from the other before making that final decision.
- Owing More Than the Future Sale Price of the RV
The moment an RV is driven out of the dealer’s display center, its value can depreciate to as much as 30%. This is the reason why the risk of getting down on RV financing is high. It means that you owe more on the loan you made for purchasing the RV than what the vehicle can bring when you decide to sell it.
To avoid such upside down situations, you can make a down payment on a large amount if that is possible. Doing so will lower the amount that you owe in the coming years in case you decide to sell the vehicle or do trade it in.
You can also start with a small one then eventually move to a larger RV. If you purchase a model that has a lower price, you can easily pay it off and you can just trade it in for a better model later on. Remember that financing an RV isn’t the same as doing so for a regular car. RV loan rates are not the same as those of a typical auto loan.
Buying one can entail some complex processes but it’s going to be worth it. Avoid the 5 mistakes that we have given above and you’re sure to enjoy wherever the road takes you instead of being haunted by all the finances.