Dreaming of hitting the open road in an RV or mobile home this summer?
Or, maybe you’re looking for an easier, cheaper way to set up a summer home without building or buying a cottage. Either way, purchasing an RV, mobile home, or travel trailer is a popular option for a lot of Canadians.
Once you have your eye set on the right RV, it’s time to think about financing. The good news? We have everything you need to know about finding the right financing for RV or mobile home purchases.
What Are RV Loans?
An RV loan is a type of financing to cover the cost of an RV, motorhome, or trailer purchase. RV loans differ somewhat from auto loans because the loan amounts are usually much higher, usually ranging from $25,000 to $300,000 or more. The RV purchase process itself is also more complex compared to the average auto loan.
Loan terms can range from a few years to 20 years or more. Generally speaking, the higher the loan amount, the longer the loan term.
What Are Mobile Home Loans?
A mobile home loan is a type of loan used to finance a mobile home purchase. Since mobile homes are considered personal property (as opposed to real estate), financing is typically acquired with a personal loan.
That said, the exact type of loan that lenders provide will depend on whether the mobile home is new or used. As well as whether the land that the mobile home is located on is owned or leased land.
Financing For RVs And Mobile Homes
The loan options you may be eligible for depend on a few factors. Whether the land that the mobile home is owned or leased and whether the property will serve as collateral for the loan.
Below are the loan options you can choose from to help finance your purchase. Some of them may be more suitable for you than others. Be sure to understand them clearly before making your final choice.
In-House RV Financing From A Dealer
Like with most vehicles, you may find a variety of financing packages through an RV dealership. So, rather than applying with a bank or other traditional lender. You would send installments directly to the dealer until your repayment plan is finished, with the vehicle’s title serving as collateral the whole time.
In-house financing can be advantageous because many dealers are open to negotiation. Especially if you have a strong income, a high credit score, and a solid down payment. This can help you obtain a lower price, affordable interest rate, and save you the trouble of qualifying for a normal loan. You may even be able to score a better deal by showing up with a pre-approval offer from another lender.
If you’d prefer to avoid in-house financing, you can also apply for an auto loan through a conventional lender, then use it to finance almost any new or used RV. Here, the vehicle’s title may again be used as collateral until your repayment plan is complete.
While an auto loan can offer up similar benefits if you have healthy finances. Qualifying may be slightly more challenging because, like most vehicles, RVs and mobile homes quickly lose value over time. If you cannot make payments as agreed, the lender may need to repossess an asset that they would have less chance of reselling in the future.
Unsecured Installment Loans
Although both of the vehicle-based loans above have benefits. A simple unsecured installment loan might be a safer choice, since no collateral is required.
However, an installment loan that’s large enough to purchase an RV can be a significant amount of money. Again you would need to present excellent financial health in order to receive the best approval odds and loan conditions.
If the mobile home you buy is situated on land that you buy and own, a traditional mortgage may be an option for you. Traditional mortgages are ideal because loan amounts are usually higher and interest rates are lower than other mobile home financing options.
A chattel mortgage is a type of loan used to cover the purchase of personal property that can be moved, such as a mobile home. Even though you may live in your mobile home, you likely won’t be able to take out a traditional mortgage to buy one. Especially if the land it sits on is leased. In this case, a chattel mortgage may be more appropriate.
The chattel, or personal property, serves as collateral for the loan. This differs from a traditional mortgage in which an immovable item, such as a house, secures the loan. Even if you move the mobile home to a different location at some point, the chattel mortgage will still stand.
It should be noted that interest rates are usually higher with chattel mortgages compared to traditional mortgages.
Financing For RV And Mobile Home Purchases With Bad Credit
While having a bad credit score of 300 – 600 can limit your options slightly. You may have access to the same range of products as you would when applying for regular RV financing. However, any loans you are approved for are likely to be smaller and come with higher interest rates.
If the RV dealerships in your area only offer bad credit loans that are out of your price range, you may have better luck applying for a secured financing product, such as a:
Home Equity Loan
This type of loan is secured against the equity of your home. Be careful, as the lender will have the right to seize your asset if you default on too many payments.
This is when you find a stronger borrower to cosign your application and agree to take over your RV payments when you can’t afford them. Make sure they know what they’re getting into before they sign, as those payments may also be too expensive for their finances.
Secured Installment Loan
Although the RV itself would be used as collateral in most cases, you can also apply for a traditional bad credit installment loan by offering one of your other valuable assets, such as a second vehicle.
Essentially, the more security you can provide, the less risk you impose on the lender if you go into loan default. As a result, you will have an easier time qualifying for more money, a lower rate, and a better repayment plan.
RV And Mobile Loan Application Process
To apply for RV or mobile home financing, follow these steps:
Step 1: Review Your Finances
Before you start searching for an RV or mobile home to purchase, consider how much you can afford to spend and how much of a loan you can qualify for. Crunch the numbers to determine how much money you have left over every month after paying all your current bills. This will give you an idea of roughly how much you can dedicate to an additional loan payment.
Also, find out what your credit score is, as this will determine your eligibility for a loan, your loan limit, and your interest rate. If your score is currently lagging, take some time to give it a boost. That way, you may qualify for a lower rate to make your loan more affordable.
Step 2: Save For A Down Payment
RV and mobile home loans typically require a minimum down payment of about 10% of the purchase price. Some lenders may require even more. Depending on the purchase price of the RV or mobile home that you plan to buy, this can translate into a hefty amount.
As such, it’s important to start saving as early as possible so you have enough to cover your down upon loan approval. And the bigger the down payment, the lower your monthly loan payments will be.
Step 3: Compare Lenders
To finance an RV or mobile home purchase, you can either use the dealer’s in-house financing options or an independent lender. Dealers that are partnered with lenders make financing more convenient, as there’s no need to shop around for a lender. However, the rates offered are usually not the best.
Traditional or alternative lenders are another option. If you choose to go this route, you’ll want to compare the loan terms and rates of different lenders. This will ensure you’re getting the best deal possible.
Regardless of which way you go, it’s helpful to get pre-approved for a loan first before applying. Having a pre-approval letter in hand will prove your financial ability to handle loan payments and will give you more negotiating power to wheel and deal on a better price. Being pre-approved will also help get the final loan approval process moving along faster.
Step 4: Complete Your Application
Once you decide which lender to work with, all you need to do is complete the loan application and supply the required documents your lender needs.
What To Increase Your Chances Of Getting An RV Or Mobile Home Loan?
Just like most financing products, RV and mobile home loans can range in all sizes, terms, and rates. In fact, if your vehicle is big enough and equipped with all the amenities of a normal house, many lenders will consider it in the same way that they would a mortgage.
When applying for your RV loan, these factors can help your odds of approval:
- A Steady Income: Be sure you have proof of income and a stable job.
- A Down Payment – As previously mentioned, RV and mobile home loans typically require a down payment. So, be sure to save up for a sizeable down payment.
- Debt-To-Income Ratio – Pay off or consolidate any existing debts to reduce your debt-to-income ratio.
- Credit Score – Get your credit score as high as possible (660 – 900 is ideal). You can check your credit report for errors. Resolving these issues can quickly boost your credit.
Financing For RV Purchases: How To Compare Options
Any RV or mobile home can be pricey, even without a loan being involved. Not to mention all the different costs you’ll have to deal with once the vehicle is in your possession. So, it’s important to thoroughly compare all financing options that are available to you.
Consider these factors before you apply:
- What kind of vehicle/home do you want
- If you would like to purchase it new or used
- Whether or not you’re comfortable using it as collateral
- The credibility of your potential lender’s business
- How large of a loan you would qualify for, given your finances
- How much your interest rate would cost during the repayment period
- What the lender’s administrative fees might add up to
- How many months or years you may be in debt for
- How do you prefer to pay your installments (cash, credit card, etc.)
- How you would handle your payments and other necessary expenses if you become unemployed or experience a financial crisis?
Consider The Overall Cost of Owning An RV Or Mobile Home
Remember, recreational vehicles can come in a wide range of makes, models, and prices. You can purchase a fold-out trailer that’s simply used for sleeping or you can go for a full-sized mobile home that you can live out of for months at a time.
No matter the capabilities of your RV or mobile home, it’s sure to cost you a bundle throughout the years. Not including your payments, interest rate, and loan fees. Which will also range in price depending on where you apply and what your finances look like. All these costs may be added on top of the car you already own.
Don’t Forget To Budget For These RV Expenses
- Down Payment – Experts recommend that you put down at least 20% of the vehicle’s total cost.
- Gasoline and/or propane – While some RVs only require propane for heating and cooking. Others need premium or diesel gasoline to function. This can cost hundreds, even thousands of dollars more a year than regular unleaded.
- Driver’s License – If your RV is closer to the size of a bus, you may need to pay for an extra Class-A license each year. In addition to your normal Class-D.
- Insurance & Registration – Since an RV is bigger and more expensive than a car, your insurance rate and registration fees will also be higher. Larger RVs may even require special insurance, similar to a mortgage.
- Utilities – Many campgrounds and trailer parks will charge you for electricity, water, and plumbing. You may even want to hook up cable TV, internet, GPS navigation, or satellite radio.
- Repairs & Maintenance – Obviously, the more advanced your RV is, the more extensive upkeep will be. Although a basic trailer may only need a tune-up from time to time, an RV that’s driven regularly will go through a lot more wear and tear over the years, especially if it’s a second-hand vehicle.
RV Loan FAQs
Can I get a cosigner for my RV loan?
How much should I put as a down payment on my RV?
What factors are considered for an RV loan?
Can I use a traditional mortgage to finance my mobile home?
Can I borrow using my RV or mobile home?
Interested In Financing For RV And Mobile Home Purchases?
From summer trips to the coast to leaf peeping in the fall. No matter where you live in Canada, an RV is a great way to explore the country. An RV or mobile home is an investment. But with the right financing, you can make your dream of hitting the road a reality. If you’re looking for financing for an RV or mobile home purchase, Loans Canad can help match you with a lender in your area.