How to Choose Recreational Vehicle Loans

Before 2021, 2017 held the record for the most RV shipments in a yearly period. Last year, nearly 600,240 recreational vehicle shipments were made, shattering the 2017 record by almost 100,000. 

The sharp increase in recreational vehicle purchases was in large part due to the pandemic. More families and individuals wanted to get outside and experience the outdoors. Luckily, it's not too late to secure recreational vehicle loans. 

Whether you are searching for new or used recreational vehicles, a loan is arguably the second most important piece to this puzzle. Some motorhomes can tally tens of thousands of dollars, and you need an interest rate and term length that fit your budget. 

To help you get started, we have compiled a complete recreational vehicle loan guide that will review key components to look for in your next lender. 


What Are Recreational Vehicles Loans

Recreational vehicle loans, or RV loans for short, typically fall under consumer loans. They encompass a wide range of off-road and recreational vehicles, such as:

  • Motorhomes
  • Trailers
  • Motorcycles
  • ATVs
  • Snowmobiles
  • And more

They are slightly different from traditional auto loans. While these loans have a similar concept as borrowing money from an entity with the vehicle as collateral, they are usually more versatile with short or longer terms and availability. 

Longer-term loans can help make it more reasonable to pay off more expensive motorhomes. RV loans also come with varying rates, and it is essential that you do your research beforehand on the rate and terms.

Common RV Loan Rates

There are two main types of rates: fixed and variable. As the name sounds, fixed interest rates are usually safer and will not fluctuate with changes in interest rates. You can select your term, and your monthly payment will remain the same.

That doesn't mean there aren't cons to fixed interest rates. The most obvious downside is that when interest rates fall, your loan rate will not change. Additionally, if you need to make changes to the term of your loan, you will accrue charges. 

Variable interest rates* will ebb and flow. There are some restrictions on how much a variable interest can increase during a yearly period. Typically, rate increases or decreases are based on a federal index or benchmark.

The upside of a variable interest rate* is that your monthly payments decrease as interest rates decrease. Unfortunately, with higher interest rates, it might not be as cost-friendly. There can be greater risks and higher payments involved with these types of recreational vehicle loans.

*As a note: Farmers bank does not offer variable rate consumer loans with the exception of some real estate loans.


RV Loan Terms

RV loans also come with varying terms that differ from traditional auto loans. For example, Farmers Bank offers terms as long as 7 years. 

Keep in mind that depending on the type of RV, they still depreciate similarly to cars. For example, fifth wheels will lose approximately 45% of their value, and Class C RVs will lose around 38% after five years. 

Camper or travel trailers tend to hold their value more, along with reputable brands such as Winnebago and Airstream. One way to offset some depreciation with longer RV loan terms is to buy used. This way, you can mitigate some of the value lost when you immediately drive it off the lot, and it will be cheaper than purchasing new. 

Types of RV and Loan Terms

Does the type of RV you purchase affect loan terms? The type of RV won't necessarily make a difference for most lenders, but how old the RV is will affect costs. 

Most institutions cap loans on RVs at ten years old. After this timeframe, you might be out of luck in finding a reputable financial institution that will loan you money for an older RV. 


Are Recreational Vehicle Loans Worth It?

You may wonder whether paying for RV costs with cash is a better option than signing a loan. Recreational vehicle costs can be expensive, and it is not always an option for a customer to pay for the entirety of it upfront. 

Additionally, it can be risky to use emergency funds or other means to pay for a recreational vehicle. Loans can give you better peace of mind with a more expensive rig. Second, cash isn't always the most affordable option.

Lower interest rate loans can sometimes save you more money long-term if you can invest the cash you would have used and make larger gains. While this does require some math and calculations, you might find that choosing a fixed, low-interest rate RV loan is affordable in the short and long term and gives you more peace of mind to invest your money elsewhere. 


Finding RV Loans

Farmers Bank specializes in several types of loans, including one for your new recreational vehicle. We help with several other steps to secure your RV, including:

  • Verifying the value
  • Verifying income
  • Using fixed rates
  • Transferring title to your name

Your final interest rate will depend on your down payment, term length, credit report, and the condition of the RV. We also make it easy for you to complete automatic payments online


Start Financing Your Recreational Vehicle

Have you wondered how recreational vehicle loans differ from auto loans? First, you can finance more money and choose your terms. Since RVs, travel trailers, and motorcycles can sometimes cost more than traditional cars, it is essential you have a lender you can trust when you find a recreational vehicle you love. 

Farmers Bank is here to help you throughout the entire process and can secure a fixed-interest loan that works for you. Are you ready to get started? Check out our branch and ATM locator to find a location nearest you!