Barry Wilder asked: Most lenders who specialize in RV loans base their underwriting criteria on different factors than other loans, such as home mortgages and auto financing. Home and car loans are considered to be “necessities”, while RV loans are considered to be more of a “luxury” type loan.
Even though statistics show that RV loans have a lower default and late payment percentage; these same statistics show that most people, when strapped for cash, will pay their “necessary” loan payments first. Because of these statistics, lenders will normally implement more stringent underwriting guidelines for RVs and even boats.
The number one factor that impacts RV loan approval is Credit History. Most lenders will want a credit score of at least 640, but a score of 700 or better is more likely to obtain an approval at the best rate and most favorable terms.
The second factor considered is your Debt-to-Income ratio. This is basically your monthly revolving debt, (mortgage, auto and credit card payments) divided by your monthly gross income. Most RV and marine lenders look for a maximum debt-to-income ratio of approximately 45% or less, however some will go as high as 50% or more with excellent credit.
The third factor considered is the Loan Value of the RV. Each lender has their own formula for determining the amount they will loan on any particular RV. Most lenders will loan somewhere between wholesale and retail, depending on the previous factors listed above. Some will loan up to the RV’s retail value on refinancing. Again, the better the credit history, the more flexible the lenders are likely to be.
Other factors are considered when determining interest rate, such as the age of the RV and the total amount financed. The higher the loan amount, the lower the interest rate, with common break points commonly set at amounts such as: $25,000 – $50,000 – $100,000, etc. Also, the older the unit, the higher the interest rate, but this also varies.
Many online financing sources specialize in RV loans – and it’s your right as a consumer to find what is best for you. You should however be aware that each time you submit an application, your credit history may be pulled up from 1 to 2, or even more times. Each time a company accesses your credit report, it can result in 2, 3 or even 5 points deducted from your credit score. You should always avoid lenders or brokers who “shotgun” your application to numerous lenders.
Your online rate and lender shopping can be done by going to your favorite search engine and typing in search terms such as: “RV loans”, “motor home financing”, etc. Normally, approval takes only a day or two, with loan completion and funding in about a week. Loan documents are usually sent directly to your home or work.
The best policy is to check rates with different financing sources without enabling them to pull your credit report until you are relatively sure you have found the company you would like to work with. At that time you should submit your actual application.
Happy RV’ing.
Kelly
