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Do you dream of taking off on the open road, visiting national parks and landmarks across the country? You’re not alone. According to the Recreational Vehicle Industry Association (RVIA), more than 9 million households own a recreational vehicle (RV) or motor home.
However, an RV can be more expensive than some houses. RVIA reports that a modest camping trailer can cost $22,000, while a motor home can cost as much as $500,000. Since few people have that much cash, they turn to motor home loans and other RV financing options.
But before you head to the dealership, make sure you know what to expect.
Types of RVs and motor homes
How much you spend on an RV depends on its use. If you plan to use it for occasional weekend trips, you can purchase something smaller and cheaper. However, if you plan to make it your primary living space, you’ll probably need to spend more so it meets your needs.
According to Kampgrounds of America, there are four main types of RVs and motor homes:
- Travel trailers: Unlike most other RVs, trailers must be towed by another vehicle. They’re smaller than other options but also cheaper.
- Class C: Class C campers have a cab that extends over the cockpit. Generally roomier and more comfortable than trailers, Class C campers cost between $50,000 and $100,000.
- Class B: Class B vehicles are about as long as the average van, so they’re easier to drive than other models. They usually cost between $40,000 and $80,000.
- Class A: For those who want more convenience, features, and comfort, Class A vehicles are perfect. They offer more space, but you’ll have to spend a lot of money to own one. They can cost $500,000 or more.
Motor home loans and RV financing options
If you’ve decided that owning an RV is right for you but don’t have the money in the bank, here are three financing options to consider.
1. Dealership financing
Like car dealerships, most RV and motor home dealerships offer on-site financing. Depending on your credit and the type of vehicle you’re purchasing, you could qualify for a rate as low as 4.99%. In most cases, you can choose a loan term as long as 20 years. However, opting for a shorter term often results in a lower rate.
2. Bank or credit union loans for RVs
You might be able to get a better deal from a credit union or bank than you would at a dealership. However, you can’t just apply for a car loan. Instead, you’ll have to apply for a recreational loan or specialty loan. Because RVs and motor homes are luxury vehicles, the lending criteria tend to be stricter than they are for a typical car loan.
If you have good credit and a stable income, you could qualify for a loan with an interest rate as low as 3.99% and a repayment term of up to 20 years.
3. Personal loans
If your credit or income isn’t good enough to qualify for dealership or recreational loans, applying for a personal loan is another option. Personal loans are offered by banks and other financial institutions. Some lenders will work with borrowers with credit scores as low as 580, so you might be more likely to get approved for a personal loan than other forms of financing.
As you decide whether a personal loan is right for you, it’s important to know the downsides. There are limits to how much you can borrow. Most lenders have a maximum of $100,000 or less, which might not be enough to cover your RV purchase. In addition, the repayment terms tend to be much shorter than they are for other loans. You might have only five years to repay the loan.
Finally, the biggest drawback to personal loans is the interest rates. If your credit is less than stellar, you might not qualify for a low-interest personal loan. Instead, lenders might offer you loans with interest rates as high as 35.99%.
For example, if you bought a $50,000 RV and qualified for a 3.99% loan from a credit union with a five-year repayment term, you’d pay $5,236 in interest. If you instead took out a personal loan for $50,000 and qualified for a five-year loan with a 20.00% interest rate, you’d pay $29,482 in interest charges alone.
If you decide to take out a loan, compare offers from multiple personal loan lenders to ensure you get the best rates.
Other costs of owning an RV
Besides the cost of financing an RV, there are other expenses you’ll need to remember. In addition to the purchase price and interest fees, you’ll have to account for sales tax. Depending on the sales tax rate in your state, taxes could add thousands to the RV’s cost.
Gasoline is also a major expense. Some RVs and motor homes get just a few miles per gallon, so you’ll spend a lot of time and money at the pump. You’ll also need to budget for regular maintenance, tires, and insurance.
Deciding to buy an RV
Buying an RV or motor home is an enormous expense. If you don’t have that money saved in the bank, you’re risking thousands. Even with RV financing options, interest rates and other fees will cause your balance to balloon. If you still dream of hitting the open road, consider renting a vehicle or start saving to pursue your goal.