Bad credit can be an obstacle to getting the things you want in life, but not necessarily an insurmountable one. For example, if you have always wanted a recreational vehicle (RV), you know that it is the type of big-ticket item that can be hard to secure financing for if you have bad credit. This guide to bad credit RV loans will give you some tips on improving your chances of getting financing, as well as making sure this is the best long-term decision to you.
Bad Credit RV Loans: Improving Your Chances
Have no illusions about this – having bad credit will make it tougher to get an RV loan. However, there are a variety of steps you can take to improve your chances:
- Make progress in your credit history. Identify the reasons your credit is bad, and start addressing those problems. This can entail catching up with overdue bills, paying down credit balances, or correcting errors in your record. Even if these steps don't immediately restore your credit rating to the low-risk range, being able to show a lender progress will demonstrate a change in the right direction.
- Show improved earnings power. Your credit rating is based on the past, but a significant raise in pay could make a meaningful difference in how risky lenders consider you to be. If your household has recently added an income, this might be another way of making lenders more confident in your ability to repay an RV loan.
- Demonstrate a reduction in other payments. Income is one thing, but your ability to repay a loan also depends on how many other financial obligations you have. If this burden has recently become easier, for example if you have recently retired an old debt, it should improve the way that lenders view you.
- Build up a strong down payment. In general, the higher the down payment, the more forgiving lenders tend to be about credit standing. So, if you want to overcome credit problems, building a down payment of 20 percent or greater should improve your chances.
- Know the value of what you are buying. The RV you choose would be the collateral for the loan, so a bad deal for you would also be a bad deal for a lender. Make sure you know the market well enough to spot a good deal, because this will increase your chances of finding a lender who feels the collateral is sufficient for the loan.
- Take advantage of the dealer's financing relationships. If you are buying from a dealer, use the fact that the dealer is motivated to complete a sale. Some dealers offer their own financing, while others have relationships that might get you a more welcome reception from a lender.
- Shop around for financing. Even if a dealer can finance a loan or introduce you to a lender, don't settle for loan terms until you've done some shopping around on your own. It's not just interest rates that vary from one lender to another – their tolerance for weaker credit also varies, so shopping around can help you find a lender willing to offer reasonable terms to someone with less-than-perfect credit.
Making the Right Choice
Getting approved for bad credit RV loans is part of the challenge, but what may be even more important in these situations is making sure the purchase is the right choice for you. Going through the following steps will help you determine whether or not you are fully comfortable with this commitment:
- Recognize the cost of bad credit. It's almost certain that your bad credit rating is going to require you to pay a higher interest rate. Run a couple amortization schedules comparing the total interest costs of the loan terms you've been offered with what those terms would be if you had good credit. This will show you what the cost of your bad credit will be over the life of the loan. You can decide whether it might be worthwhile waiting until you can repair your credit before you make this purchase.
- Make a budget you can live with. Look at the monthly payment you have taken on, and figure out in detail whether it is something your budget can live with. Remember, this purchase is supposed to bring you joy, not cause you stress.
- Be sure of your commitment to this vehicle. An expensive vehicle like a RV can depreciate in value by a great amount after you buy it, so if you have to re-sell it, you could take quite a loss. The point is, make sure that this is something you are sure you are buying for the long-term. If you've never been behind the wheel of an RV before, consider renting one before buying to make sure you know the ins and outs of operating one.
The most important part of pursuing your dreams is making sure you are clear on what those dreams are. If you have thought through the nature of this choice and the financial consequences, the above tips could help you pursue the dream of owning an RV.