Interested in taking a road trip and doing some camping along the way? 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 might be the way to do it.
The only issue is that most recreational vehicles can be pretty expensive and may require lots of maintenance throughout the years. Don’t worry, because there are loans that can help you accomplish your goal of owning an RV or mobile home.
RV and Mobile Home Loan Options
Generally, there are three options that allow you to gradually finance an RV or mobile home through divided installments. Some of them may not be right for you, so be sure to understand them clearly before making your final choice.
In-House Financing From an RV 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, an 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.
Learn how to improve your credit score to help with approval here.
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 Loan
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. In fact, almost every lender in Canada will offer this kind of loan, which appears as a lump sum of cash in your bank account (via direct deposit) after approval.
However, an installment loan that’s large enough to purchase an RV can be a significant amount of money, so you would again have to present excellent financial health in order to receive the best approval odds and loan conditions.
For even more information about secured vs. unsecured debt, click here.
How to Compare Your RV Financing 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 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 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.
Preparing Your Finances to Apply for an RV Loan
Just like most financing products, RV, mobile home, and travel trailor 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, so applying will be more expensive and complicated.
Even if you’re buying a second-hand model with few amenities, the final price tag can still be well over $10,000. Since the sheer amount of money involved and the future depreciation of the RV present significant risks for the lender, qualifying for a large loan with a decent rate and a reasonable repayment term can be pretty tough.
The stronger your finances are, the better the results will be when applying for your RV loan, so take the following measures beforehand:
- Have a full-time source of employment/income
- Save up for a sizeable down payment
- Deposit a portion of your income to an emergency account
- Pay off or consolidate any existing debts
- Check your credit report for errors, fraud, and identity theft
- Get your credit score as high as possible (660 – 900 is ideal)
- Formulate a detailed budget and cut down on unnecessary expenses
Bad Credit RV Financing Options
While having a bad credit score of 300 – 600 can limit your options slightly, you will likely 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 more expensive due to 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 total real estate value of your home (minus the balance remaining on your primary mortgage). Be careful, as the lender will have the right to seize your asset if you default on too many payments.
- Guarantor Loan – 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.
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 installments, 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.
So, prior to applying, be sure to consider and budget properly for the other expenses that may be necessary for the average RV owner, such as:
- Down Payment – experts recommend that you put down at least 20% of the vehicle’s total cost, which could be more than $5,000 – $10,000.
- Gasoline and/or propane – While some RVs only require propane for heating and cooking, others need premium or diesel gasoline to function, which 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, on top of 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 any 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.
Borrow Using Your RV or Mobile Home
Finding the cash for an emergency medical bill or an unexpected car repair isn’t always easy, so many individuals turn to loans to fill gaps in their financial plans. A complete lack of credit history makes it just as hard to get an unsecured loan as a bad credit score. However, you aren’t out of luck if you already own valuable investments like a recreational vehicle. RV title loans allow you to use your travel trailer or mobile home to secure the money you need for big expenses that aren’t covered by limited personal loans.
Security Means Better Rates
Since these kinds of bad credit RV loans are known as secured loans, they often come with lower interest rates as well. Unsecured lending comes with big risks, even when the banks are working with borrowers who have perfect credit scores. Private RV loans work well for anyone who doesn’t want to pay a high-interest rate just because their past relationship with borrowing was a little rocky.
Want to Finance Your RV or Mobile Home?
No matter where you live in Canada, having the right mobile home, trailer, or fifth-wheeler can bring some much-needed adventure into your life. Don’t worry, because Loans Canada can help you hit the road by putting you in contact with the best lenders in your area. Just call us today or check out our website for more information.