RV Financing: How Loans for a Used RV Work

A used RV loan is usually a secured loan: the lender holds a lien on the RV until the loan is paid off, and can repossess it if you stop paying. You can borrow through a bank or credit union directly, or let a dealer arrange financing through its lending partners. The loan amount, term and APR depend on the lender’s rules for the RV’s age, type and value, your credit, and the down payment. This site gives no rates or terms; compare offers and check with your lender.

How a used RV loan is structured

Because the RV is collateral, the lender cares about two things beyond your credit: what the RV is worth and how quickly it will lose that value. A motorhome or towable is a depreciating asset, and lenders know it. That is why they set their own limits on how old an RV can be, which types they will finance, and how much of the value they will lend against.

A longer term lowers the monthly payment but raises the total interest paid and raises the chance of owing more than the RV is worth. That gap is negative equity. If you sell or the RV is totaled while you are upside down, you may have to cover the difference yourself. A shorter term costs more each month but keeps the loan closer to the RV’s value.

Where the money comes from

• Banks and credit unions lend directly. A pre-approval before you shop gives you a figure to compare against dealer financing.
• Dealer-arranged lenders work through the dealership’s finance office. Convenient, but compare the APR and total finance charge, not just the monthly payment.
• Online lenders that specialize in recreational vehicles exist; the same comparison rules apply.

What lenders look at

Lenders review your credit history, income and existing debt, the RV’s age, type and condition, the amount you are financing relative to the RV’s value, and the down payment. Older RVs and some types are harder to finance; lenders set their own rules, so check with your lender before you fall in love with a particular unit.

Pre-approval and the Truth in Lending disclosure

Get pre-approved before you shop. A pre-approval from a bank or credit union gives you a borrowing figure and an APR to compare against whatever the dealer offers. It also tells you what you can afford before you are standing in a sales office.

Under the federal Truth in Lending Act, lenders must disclose the APR and the total finance charge before you sign. Compare APRs and total cost, not monthly payments. A low monthly payment stretched over a long term can cost far more in interest than a higher payment over a shorter one.

Ask for the itemized out-the-door total before signing. Dealers may add documentation fees and optional products such as service contracts, GAP coverage and protection packages. GAP coverage pays the difference between the loan balance and the insurance payout after a total loss; it is optional and priced separately. An extended service contract is a separate purchase with its own exclusions and deductibles, not the maker’s warranty.

Older RVs, lender limits and the tax question

Lenders set their own rules on the age, type and value of RV they will finance. Older units, unusual types and heavily modified RVs may be harder to finance or may require a larger down payment. Check with your lender before making an offer.

On taxes: IRS Publication 936 treats a home with sleeping, cooking and toilet facilities, including a mobile home, house trailer or boat, as a possible qualified home. Interest on a loan secured by such an RV may be deductible as home mortgage interest for those who itemize. Ask a tax professional about your situation; this site does not give tax advice.

What the loan does not cover

Financing pays for the RV. It does not pay for insurance, registration, sales tax, fuel, storage, maintenance or repairs. Budget for those separately. The real cost of owning an RV covers every line item, from insurance and tires to campground fees and winterizing.

Insurance is usually required by the lender while the loan is outstanding. State law sets liability requirements for motorhomes driven on public roads, and coverage for a towed trailer depends on the policy. See RV insurance basics for what a used RV needs.

Depreciation matters to the loan. RVs lose value over time, most steeply in their first years. A long loan on a rapidly depreciating RV is how buyers end up with negative equity. RV depreciation explains how used RVs lose value and why that favors buyers who let someone else take the first hit.

Dealer financing vs private-seller financing

A dealer can arrange financing on the spot and may handle the title work. A private seller usually cannot; you bring your own pre-approved loan, and the lender may need the title and a bill of sale before releasing funds. A private sale is usually as-is, with no warranty. Buying from a dealer vs a private seller compares the paperwork, protections and risks of each.

What goes wrong

• Shopping by monthly payment. A long term can make an expensive RV look affordable while you pay far more in interest and risk negative equity.
• Skipping pre-approval. Without a figure from your own lender, you have nothing to compare the dealer’s offer against.
• Not reading the Truth in Lending disclosure. The APR and total finance charge are on it; compare them, not the payment.
• Financing an RV that fails inspection. Get an independent inspection before the loan closes. Water damage is among the most common and most expensive defects in used RVs, and a lender will not find it for you.
• Assuming the loan covers everything. Insurance, tax, registration, storage and maintenance are separate costs.
• Ignoring the lien on a private sale. If a lender holds a lien, it must be released before ownership can pass. Pay at your bank, check the title and the seller’s ID, and sign the title and bill of sale at the same time.
• Falling for a too-good listing. A listing far below comparable RVs, a seller who cannot meet, payment by wire transfer or gift cards, or an escrow service the seller chooses are patterns the FTC and FBI warn about. Pay nothing before you see the RV and the title.
• Forgetting GAP and service contracts are optional. Price them separately and decide whether they are worth it to you.

Before you sign

• Get pre-approved and compare APRs and total finance charges.
• Ask for the itemized out-the-door total.
• Confirm the lender’s rules on the RV’s age and type.
• Have the RV inspected before the loan closes.
• Budget for insurance, tax, registration, fuel, storage and maintenance.
• Check your state DMV for titling, registration and sales tax rules.
• Ask a tax professional about any deduction question.
• Read the service contract exclusions and who pays the repair shop.