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THE RATES ARE LOW
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The main factors determining the interest rate you end up paying will depend on
#1 How well you did your homework.
#2. How well you did your homework.
#3 How well you did your homework.
When you shop there will probably be a difference of no more than ¼ - ½% between three on-line lenders, if they are legitimate. The difference will be in the processing fees and the customer service you receive.
You will be offered many ways to finance your RV and unfortunately not all companies will be forthcoming about the one that is in your best interest. The interest rate you see advertised might not be what it seems to be. It could be a rate from a local bank that can only finance an RV bought in Small-town, USA. It could be a variable rate that is low to start but will increase, sometimes dramatically after three years. This one might be ok, you can refinance it before the rate goes up, but just suppose something happens that affects your credit and you cannot get approved to refinance the unit? There are loans where the interest you pay is figured out over the life of the contract and even if you pay the loan off early you are responsible for ALL the interest. It is to your advantage to have it calculated on a per day basis. You want a simple interest loan. An interest between 2.99 – 5.99% is probably a buy-down rate. What is a buy-down rate? A come-on by people who try to lead you to believe you are saving a lot of money because the rate is so low! A short explanation is that they charge you more than the RV is worth and pay part of that money to a bank so you will get a lower interest rate. You will NEVER be in a position where you have any equity in your unit and will have to take money out of pocket when you are ready to sell it. IF IT SOUNDS TOO GOOD TO BE TRUE IT PROBABLY IS! BUYER BEWARE!
You need the right answer to these questions:
How many times will you pull my credit?
What are the total processing fees? Will I receive a bill several months from now for secretarial fees or some such type billing?
Are you approved of by the Better Business Bureau?
How long have you been advertising on the Internet?
How long have you been in business?
Most banks will charge a small penalty for early pay-off, what are your fees?
The amount of down payment you will need is variable. The minimum amount you will need is 10%. It is 15% if you are financing your unit in a Montana LLC. We do not advise that you choose the “no down payment” plan. Let’s face it; there are no free rides! No one is going to give you something for nothing. No down payment sounds wonderful but you will not be pleased when you do the math and find out you are paying too much in interest, and will not have the equity you should have when it comes time to sell. And sell it you will! The average RV owner will keep his unit 49 months!
You can apply for a loan before you have found the RV of your dreams. There are advantages to this. It is called a pre-approval. You apply for the approximate amount of money that you will need. You can then go shopping with money in hand in case you come across a good deal on the unit you really want.
Be realistic when it comes to the RV of your dreams. If you are a first time buyer you may want to purchase a smaller unit until you are sure this lifestyle is for you. It also takes a while to learn about an RV, how the holding tanks are emptied, how they are filled, how the propane works, and yes, even how to drive it! Backing up a fifth-wheel is an adventure all by itself, even if you can back up boat trailers, camping trailers and the like, this is a different experience. If you pull a boat, ATV or storage trailer with a 30 ft. RV all of a sudden it can be as long as a semi-trailer.
The age of the RV will affect the interest rate you will pay. If the unit is older than five years there will be a small increase in the rate.
The amount of the loan will affect the interest rate you will pay. The more money you borrow the lower the rate will be.
Your credit score will affect the amount of interest you will pay, the lower your score the more interest you will pay. You need good credit to purchase an RV. It is considered a luxury item.
No one can give you an on the spot interest rate quote, they are guessing and making a bet you have good credit. Most often they will come back after they receive your application and tell you the rate they quoted you is not available and they will offer a higher rate. The actual bank you are going to borrow from is who decides on the rate. They cannot give you an answer until they have looked at your credit profile, not just your credit score. Your credit profile includes your credit score. The bank wants to know what your income to debt ratio is, if you pay your bills on time, if you have assets. They want to know that you will be able to pay back the money.