RV and Boat Loan Secrets

RV Financing Secrets

TIP!

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How much can I save by refinancing my existing RV loan?

The answer to this question depends upon several factors. It would depend on how much you could reduce your interest rate. It would also depend on your unpaid loan balance. You would need to weigh the potential savings against the closing costs... if any.

For example: If a loan with $27,000 remaining to be paid at 8.5% interest could be refinanced at 7.25%, you could save over $3,500 in finance charges. You could also choose to lower your payments, or lower your repayment term. The choice is yours, but in the case of RV refinancing, there are NO closing costs which means that virtually any savings in interest rate make a refinance a smart move.

What's your percentage rate?

Finance is a tricky business that can help you save thousands of dollars, or can sneak up and bite you in the behind. There are many aspects of financing your vehicle other than percentage rate and payments, although these are the two things that people usually focus on.

Obviously these two points are of major importance in your decision to purchase your RV, and also if and where to finance it. We will focus on these two points first, but then we will go deeper into the hidden secrets behind financing your RV like a pro.

The first factor to consider is obviously interest rate. A savings of even a quarter to a half percent in interest rate will translate into thousands of dollars over the course of the loan. This will be one aspect of comparison between your dealer's financing and your bank.

The second aspect you must consider is term. In other words, how long will they finance the loan. This will directly effect your monthly payment amount.

Dealership vs. Bank Financing

Most banks are set up primarily to finance auto loans with maximum terms of only 5 to 6 years. Because of constantly rising car prices, some banks and credit unions are now offering longer terms. Rarely however, will they go any longer than 7 years. Even if you are financing an RV, the same terms will apply. This can make for an extremely high payment.

This is where the RV dealer has an advantage that you can use. RV dealers are set up with lenders who finance recreational vehicles on a daily basis. In order to fit the payments into your budget, you can easily finance for 10 or even 15 years. This can mean the difference between an affordable payment, and one that is difficult if not impossible. (In higher price ranges some dealers are offering 20 year terms!)

Insider Finance Secrets

Some savvy RV buyers use a system to get the best of both worlds. They finance the RV for the longest term of 10, 12 or even 15 years. This makes the payment much lower than they really need.

They then make their monthly payment plus an additional amount. This cuts the length of the repayment period dramatically. AND, it also cuts the equivalent interest rate paid to about half of what they originally financed. (Huh??)

Example:

Amount Financed:    $25,000
Interest Rate:                7.5%
Term in Years:           15 years
Payment Amount:      $231.75

Now if this person added $100 to each monthly payment, he would change the repayment terms to:

Equivalent Interest:        4.9%
Term in Years:            8.3 years
Interest Savings:       $11,409.00

Now lets assume that this person doubles the monthly payment.

Equivalent Interest:        3.4%
Term in Years:             5 years
Interest Savings:       $16,580.00

If you compare this to an average 5 year loan, it is a savings of about 6.6% in interest! PLUS... You also just paid off a 15 year loan in 5 years!

Financing vs. Paying Cash

Which is better? Paying cash for your new RV... or financing it?

This normally depends on what kind of investment, if any, you have your money in. You will need to ask yourself which will be the better return on your money.

For example: If you had your money in an investment paying 8.5% interest, and you had a chance to finance your RV at 7.25%, it would make sense to leave your money where it can earn additional dividends.

Sometimes it makes sense to finance your RV even if the interest rate is higher than where you have your money invested. You can pay an additional amount towards the principal balance and reduce your effective interest rate. This technique is shown in the examples listed above.

Tax Deduction??

Here's another reason you should consider financing your RV. Did you know that interest paid on the majority of RV loans is tax deductible as home mortgage interest?

To qualify, the Internal Revenue Service (IRS) has ruled that:

The RV Must be used as security for the loan.

The RV must have basic sleeping, cooking, and toilet facilities

Nearly all RV types - motorhomes, travel trailers, truck campers and many folding camping trailers - are equipped with these facilities.*

So enjoy the benefits of RV travel and get a tax advantage too!

*An RV with full facilities can qualify as a "dwelling unit" under the IRS code section 280A(f)(1). The U.S. tax court case of Haberkorn v. Commissioner. 75 T.C. 259 (Nov. 12, 1980 filed) gives further guidance on the tax deductibility of RVs. Taxpayers may not claim the interest from more than two qualified homes on their tax returns. Ask your tax adviser for more information.

The description qualifies virtually every type of recreational vehicle on the market today! Even pop-up campers can qualify under this description. All you would need is a simple stove and porta-potty.

TIP!

We have found a financing source on the internet that is second to none when it comes to finding the
best rates and loan programs. We have referred hundreds of loyal RV Secrets readers to them.

Best Rates on Boat Loans