RV Financing: How RV Loans Work and the Credit Score You Need

RV financing works a lot like a car loan: you borrow money from a lender to buy a motorhome, travel trailer, or camper, then pay it back in monthly payments over a set term. Most lenders look for a credit score of 670 or higher, a down payment of 10% to 20%, and a debt-to-income ratio under 36%. RV loan terms typically range from 5 to 20 years, depending on the lender and how much you borrow.

Whether you’re dreaming of a small camper or a luxurious motorhome, understanding how RV financing works helps you budget with confidence and get the best rate. Here’s what you need to know before you apply.

How Does RV Financing Work?

RV loans work much like auto loans, but they often involve larger amounts and longer terms because RVs can cost far more than a typical car. Depending on the lender and the size of the loan, terms can run from a few years to as long as 20 years.

Once you’re approved, the lender pays the seller for the RV, and you repay the lender in monthly payments that cover the amount you borrowed plus interest. In most cases, the RV itself serves as collateral, so the lender holds a lien on the title until the loan is paid off. Your monthly payment depends on how much you finance, your interest rate, and the length of your loan, while your credit score, down payment, and the RV’s price and age all affect the rate you’re offered.

You can finance an RV through a bank, a credit union, an online lender, or the dealership. Getting preapproved before you shop gives you a firm budget and makes it easier to compare any financing the dealer offers.

RV Loan Requirements: What Lenders Look For

They’ll review your income, existing debts, down payment, and payment history to judge how easily you can take on a new monthly payment. Because the RV usually secures the loan, many lenders also consider the RV itself, including its type, age, and price. An older or lower-value RV can mean a shorter repayment term or stricter approval terms. Here’s what each factor means for your application.

What Credit Score Do You Need for an RV Loan?  

Your credit score significantly affects your eligibility and the interest rates you’ll receive. Generally, lenders prefer a credit score of at least 670, though some may consider scores as low as 600. For the best RV loan rates, aim for a score in the mid-700s or higher. The same ranges generally apply whether you’re financing a motorhome, a travel trailer, or a small camper.

If your score is on the lower end, a larger down payment can help strengthen your application. Check your credit reports from all three major credit bureaus to identify and address any issues before applying. If you’re not sure where you stand, start with understanding your credit score and what affects it.

Income and Debt-to-Income Ratio (DTI)  

Lenders will require proof of income to ensure you can handle the monthly payments. They will also assess your DTI ratio, which should ideally be under 36% even after adding the RV loan. A lower DTI indicates a better capacity to manage additional debt.

Cost and Down Payment 

RVs vary widely in price. A pop-up camper might cost around $5,000, while a high-end motorhome can exceed $1 million. New RVs depreciate quickly, much like new cars, whereas used RVs are more affordable but may lack modern amenities. Expect to make a down payment of 10% to 20%, which can reduce your loan amount and interest rate.

Credit History  

Lenders will review your credit history for on-time payments on existing debts. A strong payment history increases your chances of approval and favorable terms.

How RV Loans Work

Secured vs. Unsecured Loans 

RV loans can be secured (using the RV as collateral) or unsecured (based solely on your creditworthiness). Secured loans generally offer lower interest rates but risk repossession if you default. Unsecured loans might be an option for smaller RVs and typically come with higher interest rates.

Loan Terms and Interest Rates

RV Loan terms and interest rates vary by lender and depend on the RV’s type and cost, as well as your credit profile. Fixed interest rates are common, providing consistent monthly payments. Terms can range from 2 to 20 years, with longer terms resulting in more interest paid over time.

Questions About How RV Loans Work? Ask Us!

RV Loans for Campers, Travel Trailers, and Motorhomes

RV financing isn’t just for big motorhomes. Most RV loans can be used for the full range of recreational vehicles, including:

• Motorhomes: Drivable RVs with the engine built in. These usually have the highest price tags, so they tend to come with larger loan amounts and longer terms.
• Travel trailers and fifth wheels: Towable RVs you pull with a separate vehicle. Travel trailers can be towed by an SUV, van, or truck, while fifth wheels need a pickup truck with a special hitch in the bed. They typically cost less than motorhomes, so loan amounts and terms are often smaller.
• Pop-up campers and small campers: The most affordable option, and often the easiest to finance with a shorter loan.

The application process and credit requirements are generally the same no matter which type you choose. The biggest differences are how much you borrow and how long you’ll take to pay it off.

How to Get an RV Loan in 5 Steps

1. Determine Your Budget: Assess your finances and set a realistic budget, accounting for purchase price, insurance, maintenance, and operating costs. Use an RV loan calculator to estimate monthly payments based on different loan amounts and terms.

2. Check Your Credit Score: Ensure your credit is in good shape before applying. Aim to improve your score if necessary by paying down debts and correcting any errors on your credit report.

3. Save for a Down Payment: A larger down payment can lower your monthly payments and interest rate, and improve your chances of loan approval, especially with less-than-perfect credit.

4. Shop for Lenders: Compare loan offers from various sources, including banks, credit unions, and online lenders. Pre-approval can streamline your RV shopping by setting a clear budget.

5. Negotiate for the Best Terms: Don’t hesitate to negotiate the purchase price and loan terms. Dealerships often expect some haggling and might offer additional incentives like maintenance packages or upgrades.

RV Financing with First Alliance Credit Union

At First Alliance Credit Union, we offer competitive RV financing options tailored to meet your needs. Our down-to-earth, friendly approach ensures you get honest, respectful, and caring service every step of the way. Whether you're buying your first RV or upgrading to a larger model, we're here to help you achieve your travel dreams without breaking the bank.

Conclusion

Financing an RV is a significant investment, but with careful planning and the right lender, it can be a smooth and rewarding process. By understanding your financing options, improving your credit score, and choosing a reliable lender like First Alliance Credit Union, you can hit the road with confidence and peace of mind. If you’re ready to explore RV financing options, contact First Alliance Credit Union today. Our knowledgeable team is here to help you every step of the way. Happy travels!

Apply for an RV Loan Today!