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What is an RV Loan and How Does it Work?

The RV Loan is a recreational vehicle loan that is offered by various institutions like banks, credit unions, and RV dealerships. It works like a typical car or home loan.  

by Damodharan N

Updated Jun 12, 2024

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What is an RV Loan and How Does it Work?

What is an RV Loan?

The RV Loan is a recreational vehicle loan used to buy a vehicle that is very popular among the American middle class for its use case. In an RV, one can drive across the country and set up camp in the national parks or nearby camping sites with their loved ones and friends.

This vehicle is so popular that dedicated exclusive luxury brands in this segment started to pop up, like Newmar and others. So to tap the market for these niche products, banks and credit unions created this RV loan as a financial product for people to enjoy the pleasure of camping with their loved ones, either in the national parks of the US or nearby camping sites. Let's look at how the loan actually works in detail. 

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How Does RV Loan Work?

The processing of an RV loan is simple as it is a moveable and depreciation asset. It works like a car or home loan mortgage, in which the interest on the loan is based on the asset type and its owner, i.e., you. The lenders generally assess the loan recipient based on their credit score, income, previous debt levels, and existing debts.

Other factors, like the type of RV, make and model, mileage, old or new, and how often it might be used, depending on it the lenders give the loan. Also, the rate of interest for these loans will vary with financial institutions like banks, RV dealerships, credit unions, and online lenders.

The latest trends in this market point to growth. According to the Mordor financial intelligence report, the RV financial market has a CAGR of 7.69% for the time period of 2024–2029. The current size of this market is USD 36.75 billion.

The largest lenders are Lending Tree, Bank of America, and Wells Fargo, among the top five market lenders. The biggest market is North America, and the fastest-growing market is Asia-Pacific. 

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Requirements for an RV Loan 

The requirements of the RV loan can differ based on the type of institution from which one is getting the loan. So the things we are enumerating are general, not specific to any institution. 

  • Low debt levels. 
  • Income range suitable to repay the loan with interest. 
  • Membership is a must if you are getting it from particular credit unions.
  • Previous better relationships with banks.
  • Dealerships have fewer requirements if they are secured loans.

Apart from these, the general rule of thumb about requirements is like getting any other loans, like car and home mortgage loans. 

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Eligibility For RV Loan 

The eligibility for an RV loan is anyone who has a better credit score and better income level. 

  • Credit scores range from 670 to 739 based on the FICO.
  • Debt-to-income ratio.
  • New RVs give much more leeway than used ones on secured loans.

The old RVs can be obtained on unsecured loans, which can be easy if you have a better credit score.  

Types of RV Loans 

There are two major types of RV loans: secured loans and unsecured loans. 

Secured Loans 

Secured loans have asset-backed debt; they are primarily used on home mortgage loans and auto finance. In this case, they are primarily offered at RV dealerships and banks with better interest rate terms.

These loans also have a longer repayment term of 20 years. So the interest rate can be much lower. This is for people who don't want to roam around getting the RV in one place and financing it in other places, as most RV dealers will offer this loan. 

Unsecured loans 

Unsecured loans are for short-term payments with higher interest rates. People who want a classic old, or used RV can use this method to get their desired one in the short term.

The interest rate for this is based solely on the credit score of the loan recipient, and it may go higher in some scenarios. If you have a bad credit score, then you may not be eligible for this loan, or you might pay a higher interest rate, sometimes as high as 36%. The highest term limit on this loan category is 7 years. 

Benefits of RV loan 

The benefits of the RV loan might vary based on what one considers to be benefits for themselves. 

  • They are readily available at various institutions, like credit unions, banks, RV dealerships, and online lenders.
  • They come with varying interest rates and payment ranges based on the loan recipient's credit score and RV make and model. 
  • This loan offers people who want a long-term payment of 20 years with a low interest rate and a short-term payment range of 7 years with a higher interest rate.
  • This loan gives people ease of credit access in an otherwise untapped market, which is very unique to the US. 
  • This loan helps the people of the American middle-class finance the RV and travel to the national parks to enjoy their beauty and camp with their loved ones.

What is an RV loan - FAQs

1. What is an RV loan?   

An RV loan is a financial product used to purchase a recreational vehicle, popular among the American middle class for camping and traveling.

2. How do RV loans work?  

 RV loans work like car or home loans, with interest rates based on the borrower’s credit score, income, and the RV’s specifics (make, model, and mileage).

3. What are the types of RV loans?   

There are two types: secured loans (backed by the RV itself) and unsecured loans (not backed by any asset).

4. What is required to get an RV loan?   

The requirements typically include a good credit score, low debt levels, and a suitable income. Membership may be required for certain credit unions.

5. What are the benefits of an RV loan?   

The benefits include varied availability and flexible terms. 

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