Bad Credit RV Loans: How to Get Approved
Bad credit RV loans are available to help you hit the open road with the recreational vehicle (RV) of your dreams. While your credit status is an important part of the picture, some lenders don’t have a set minimum credit score. Instead they may require a significant down payment and focus on your ability to repay the loan. Here’s how to get approved for a bad credit RV loan, as well as some available financing options.
In this article, we’ll cover…
How to get an RV loan when you have bad credit
1. Establish a realistic payment
If you have bad credit, the biggest factor lenders focus on when deciding whether to approve you for a loan is whether you’ll be able to repay it. Use an RV loan calculator to help determine a realistic payment and budget for you and your family.
Above all, the payment shouldn’t stretch your budget. There are many other RV costs to plan for, including fuel, insurance, campground fees and maintenance that needs to be done inside and out. The age and condition of the RV can impact these costs; it’s important to learn how to choose a new versus used RV.
2. Save up a 10% down payment
In general, bad credit RV lenders look for at least a 10% down payment, though some ask for 20%. The bigger the down payment, the more likely you are to be approved. Here are some other benefits of making a large down payment:
- Your payment will be low and manageable for years to come
- You’ll have equity in the RV, preventing you from going underwater on the vehicle loan
- Your loan-to-value (LTV) ratio will be positive
- You won’t need to pay for auto GAP insurance
3. Pick out an RV
This is the fun part: Go shopping. There are many types of RVs to choose from. Here’s a quick rundown:
Class A motorhome. Generally the most expensive, this type of RV is typically the largest.
Class B motorhome. Also known as a “camper van,” this RV is built using the body of a van as a base.
Class C motorhome. Midsized motorhomes with a midsize price, Class C RVs can be a goldilocks solution.
Fifth-wheel RV. This large, towable RV requires a pickup to tow and is often luxurious.
Travel trailer. Variable and versatile, travel trailers can be towed by many types of vehicles.
4. Get preapproved
If you get preapproved for an RV loan before you go shopping, you can increase your negotiating power at the dealership. Don’t be surprised if your interest rate on an RV loan is higher than your auto loan rate; RVs are considered a luxury item, and as such, they present a higher risk to lenders. This is why it’s doubly important to get multiple loan offers so you can choose the best one.
And at the dealership, the sales team may take you more seriously if you walk in with a preapproval letter from a lender, which can help you get a better price.
5. Sign the paperwork and enjoy RVing
Go over the paperwork, ask any questions you have and sign on the dotted line. You’re ready to enjoy your RV!
As you pay your RV loan and improve your credit score, you may be able to refinance your RV at a better rate down the line. As of the date of publishing, we found APRs (annual percentage rates) as low as 4.74% for applicants with good credit. Applicants with bad credit, if approved, may be charged 24.99% APR or higher, up to their state’s legal limit. Refinancing your bad credit RV loan could save you a lot of money later on.
Lenders that offer RV loans for borrowers with bad credit
Even with credit that’s less than perfect and FICO scores in the lower tiers, you still have options when it’s time to finance your RV purchase.
While online lenders typically offer RV loans nationwide, they lack in-person support.
My Financing USA
Some online lenders, such as My Financing USA, have divisions that specialize in bad-credit RV loans. My Financing USA approves applications with credit scores as low as 550, with loan amounts as small as $10,000 and terms up to 15 years. Past bankruptcies may be OK. While this lender prefers a 10% down payment, your trade-in could help with that. There is also a $495 document fee at the time of closing. APRs with this lender depend on your state of residence, the RV you want to finance, your credit and other factors.
Southeast Financial is an online lender that offers bad-credit RV loans and has flexible minimum amounts. You may be approved for a motorhome that’s up to 12 years old and other RVs that are up to 15 years old if you can prove a stable employment history, a credit score of 550 or higher and a minimum annual income of $20,000 to $30,000. Interest rates are based on credit history. Those with bad credit will pay more, although a maximum isn’t defined on Southeast Financial’s website. This lender offers terms up to 15 years.
Credit unions can offer great loan options and low rates but require you to be a member. You may easily qualify for membership based on where you live, and membership requirements for some national credit unions can be as simple as making a one-time, $5 donation to a charity organization. Your local credit union may offer loan approval on a case-by-case basis without a minimum credit score requirement.
FedEx Employees Credit Association
FedEx Employees Credit Association will loan up to 100% of a new motorized RV’s purchase price in addition to license and tax and title fees. For new, non-motorized RVs, it will lend up to 90% of the sale price, including tax, title and license. If the RV is used, it will loan up to the used wholesale price. Terms go up to 84 months.
Banks offer in-person service and potential benefits for existing customers, although they may have higher rates.
With an established relationship at a bank, your credit score may be less of a factor than at financial institutions where you don’t have a history. USAA is a bank with membership open to active service members, veterans and their families. Although there is no disclosed minimum credit score requirement, USAA RV loans offer terms up to 180 months.
Getting financing at a dealership is convenient but it’s typically expensive. While dealers typically have a large network of lender partners, they are incentivized to offer you the loan that gives them the highest business referral fee, rather than the loan with the lowest APR for you.
If you shop around for a loan at a bank, credit union or online lender first, you can take that offer to the RV dealership and ask them to beat the rate you have in hand.
“Buy here, pay here” dealers may work with bad credit borrowers, but be cautious. This type of in-house financing could come with particularly high rates or add-ons. If you decide to work with one of these types of dealerships, you’ll have to choose from their available inventory.
Other types of RV financing
There are other options for financing an RV, including using a credit card or peer-to-peer loan, particularly if you’re considering a relatively low-cost, used RV. But these options typically have higher interest rates than the alternatives.
If you can’t qualify for a bad-credit RV loan, you could take out a personal loan to pay for the RV. However, be prepared to pay origination fees and interest that reaches the legal limit for your state, as high as 35.99%, depending on where you live. You may also face restrictions on loan amounts, which could limit your RV choices.
Home equity loans
If your credit is in bad shape but you have equity in your home, you may be tempted to access that money to finance your RV via a home equity loan or a home equity line of credit (HELOC). Doing so means you’ll secure your RV loan with your home as collateral. However, if you default on your payments, you could lose your home. For this reason, we usually don’t recommend using funds secured with your home to finance an RV.
If your credit score is at least 600, you may be able to score a peer-to-peer loan, in which you borrow from other people rather than an organization. Like personal loans, however, you may run into high fees and high interest rates.