You are finally ready to purchase that perfect boat or RV. You have already found it at the dealer and think you can get it for a fair price.
The next step is to get financing and this is a process that is a little different than buying a house or car. RVs and boats are considered luxury items so banks will approach financing for them and here is where you will get a little clarity about how this process will work.
Interest rates and terms for boat and RV loans are different than auto loans. An auto loan will last between 5 and 7 years where the loan you take out for your boat or RV can go up to 20 years. This gives lenders plenty of flexibility when offering the loan, but usually a bank will keep the terms around 10 years if you are asking for a large amount or if your credit isn’t. Longer terms will mean lower monthly payments but the entire purchase will be more expensive down the road.
What determines term length?
The lender will look at a number of things when you apply for a loan and these factors will determine the length of the terms they offer you.
First is the size of your loan and the more money you need, the longer it will take to pay off. Next, the lender will look at what you want to buy. Usually they will give longer terms for a new unit over a used one. Even lightly used units are subject to careful scrutiny of their condition. And last but certainly not least, your lender looks at your credit score. The lower your credit score, the least favorable terms you will get. In fact, if you are thinking of getting a loan for a recreational vehicle your credit should be over 600 for your application to be considered.
How does credit score determine interest rates?
In general, 640 is considered a good credit score but borrowers with lower scores can expect to get much higher rates. IT pays to check your credit score before committing to a significant purchase such as an RV or boat.
RV financing is similar to financing any other vehicle, but there are some unique advantages. For example, if a vehicle contains areas for sleeping, cooking, and toilet facilities, it can be declared a residence that you can claim on your taxes as a deduction. And, as long as the RV is used as security for the loan that was secured to buy it, the interest can be deducted from your taxes because according to the IRS the RV is your home, and you are a homeowner.
Contact Finance Solution today and our loan professionals will work to get you behind the wheel of your dream vehicle.