If you have been wondering whether bad credit RV loans are a possibility, then you will be glad to know that the short answer is yes. Under certain circumstances, RV loans for bad credit can be approved.
Before you decide to start looking for RV loans with a bad credit history, however, there are a few things you must know about how your application is likely to be received and handled by finance companies.
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How Finance Companies Assess Bad Credit RV Loans
The first thing an RV finance company does is look at your credit score, and assess how much lower than ideal it is.
They use that information to calculate how much additional risk you pose to their company.
If the risk falls within acceptable parameters (which means you have a bad credit score, but you still fall within a range that the lender is comfortable operating in), then you will probably be approved.
But there is a cost to having bad credit.
The lender will apply a much higher interest rate to your loan than somebody with a better credit score, to offset the additional risk.
That is precisely why you can never get the best RV loan rates if you have bad credit – you are always going to be paying more for the increased risk.
Since banks and finance companies base RV loan rates on your credit score, and since RVs are classed as a luxury purchase, if you apply for an RV loan with a bad credit score, you need to take extra steps to reduce the risk to the company you are dealing with.
Only by reducing the risk to your lender will you have a chance of getting a better deal.
There are a few ways you can reduce the cost of RV loans for bad credit applicants. Those include:
Yes, there are RV loans out there that you can get without any down payment – but if you are shopping for bad credit RV loans, then you are dreaming. Zero down loans for RVs don't get offered to people with a poor credit record.
Ideally, you want to have a significant cash down payment ready when you apply for a bad credit RV loan. That way, the finance company has to carry less of the risk, because they are investing less in the purchase.
Since RV loans are also secured by the vehicle itself, and since you will own a significant portion of the equity in the vehicle from day one, it also helps to reassure them that you will not miss payments.
Another option is to put off applying for bad credit RV loans until you have done some credit repair on your less than perfect history. Repaying an RV loan will require you to make significant monthly payments.
If you have the cash available to do that, it makes sense to spend some time, perhaps a few months, or even a year, paying down existing debts. The better your repayment record on your other credit is, the better your credit score will be when you do shop for an RV loan.
Remember that when it comes to credit repair, the first step is to repay some of your debts. Anyone who promises to repair your credit, without having to repay the debt, probably is not being completely honest with you.
If you have a friend or family member who has a great credit record, they may also be able to help you to secure a bad credit RV loan. If they are willing to co-sign the loan, or sign surety for the loan, then their credit rating will be taken into account as well.
As the RV loan's guaranteed by your co-signer, you usually have a much better chance of getting the finance you need.
However, since they will also be liable if you default on the payments, you need to be extra sure that you can afford the repayments you will be making. If you default, they might have to pay on your behalf, or their credit record could take a beating.
Speak to several RV finance companies, and find out whether there are any other ways you can reduce the amount you pay on an RV loan.
You may find that by changing the repayment term, or by paying a little more than the minimum each month, you can still get the lowest RV loan rate for your credit rating score.
Also remember that banks and private lenders may have different criteria, and different risk cutoff points: this is why it's so important to ask several lenders whether you qualify for a loan with them. A credit rating that is too low for one may still be acceptable to another.
Before you even start considering bad credit RV loans, it is a good idea to take a long, hard look at your finances.
Take a look online at what the best used RV loans are. Find out what the monthly repayments are, based on a standard loan term.
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Then take a realistic look at your monthly finances, to see whether you have the necessary cash to make the payments every month. Over-extending yourself when you already have bad credit is never a good idea, and the only likely result will be that you further damage an already bad credit score.
If your credit score is bad due to a temporary issue some time ago, and you have the money in your budget to make the repayments, bad credit RV loans could improve your credit score. Demonstrating the ability to repay a loan is what your credit score is based on.
Remember that credit rating agencies record positive and negative information about your payment profile. If you make a significant purchase, such as using a bad credit RV loan to buy a recreational vehicle, and you make regular payments, you will find that your credit score improves over time.
You then have the option of a new RV loan to refinance the vehicle at a better rate, or to renegotiate your deal with your current lender.
RVs Are Significant Investments
Buying an RV is a significant investment. You want to take every factor into account when you are making the decision, to ensure that you get the maximum benefit out of the deal.
An RV should never be an impulse buy, and if you find that you simply cannot get the lowest RV loan rate because of your credit report, then it may be a better idea to rent an RV when you plan to travel for now, and work on improving your financial situation first.
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