Canada's breathtaking landscapes beckon to be explored, offering countless miles of scenic beauty for RV owners to gaze upon. Unfortunately, the excitement of camping in Canada can sometimes be overshadowed by the challenge of obtaining an affordable RV loan, especially when you are dealing with bad credit. You may have previous credit troubles such as bankruptcy or write-off holding back your dreams of getting approved for RV ownership. Luckily, we have all of the information so that you can ensure that you're understanding of the options available for your RV purchase. In this blog post, we will guide you through your options for RV loans in Canada, illustrate the intricacies involved with securing competitive interest rates based on your credit and ultimately provide you with the knowledge to decide on if RV financing is right for you. Let's dig in!
Understanding Bad Credit RV Financing in Canada
Locking in your RV loan with bad credit is often not as straightforward as securing an automobile loan. Major banks and credit unions frequently steer clear of helping those with a poor credit history. As a result, bad credit RV financing is often handled by specialized asset lenders who primarily work with dealerships rather than directly with the public.
The structure of recreational vehicle loans is similar to other asset loans where the RV is to act as collateral, reducing thee risk for lenders as they can claim the asset if a borrower defaults on the loan. While this security element makes it feasible for these specialized lenders to provide an RV loan to someone with poor credit, it's important to remember that the increased risk is typically reflected in higher interest rates. It is also worth noting that some of these lenders report to your credit bureau which, in the long term if paid on time, can help to prove positive payment history and give a boost to your credit bureau. In addition, most lenders who assist in bad credit situations will aim to secure financing options that make sense for your budget.
One important thing to bear in mind is that asset lenders in Canada do not finance those looking at making their RV a permanent home. This is regardless of credit and due to rules and restrictions involved with repossession when the RV is your primary residence.
Comparing RV Financing Rates
As of April 2024, the starting rates on RV financing stand at 9.9% and can reach as high as 29.9% for those with extremely bad credit. This might seem steep, especially compared to the more conventional bank loan rates that hover closer to 7%, and especially compared with manufacturer financing which offers rates as low as 3%.
That being said, without other RV loan options available, this may be the only route you will be pre-approved for so it is important to set your expectations accordingly. Some tips to saving costs when presented with a high interest loan are:
- Shop for affordable RVs or travel trailers. You shouldn't be shopping the luxury motorhome market when you're dealing with bad credit.
- Only accept RV loans from lenders who allows extra payments towards principal without penalty. This way you can pay extra and save money on interest over the course of the loan.
- Keep your monthly payments manageable without overextending your budget.
- Most lenders will allow a deferral if you end up in a bind. We recommend trying to avoid taking this option at all costs as most lenders penalize those who defer a monthly.
- Read your RV loan approval carefully and ensure that you understand the costs involved. If the monthly payments seem too high on the recreational vehicle that you're interested in; it may be best to start shopping for other RVs.
With all of this in mind, finding flexible payment options is key to owning your dream RV. Fortunately, there are a number of options when it comes to obtaining bad credit RV loans in Canada. Finding a trustworthy one is paramount to ensure you aren't being taken advantage of in your bad credit situation. We'll explore that next.
Finding a Trustworthy Lender for Bad Credit RV Loans
Finding a trustworthy lender is crucial in this process; especially if dealing with bad credit. Canada boasts a plethora of options with in-person and online lenders advertising continously to draw in RV buyers. As mentioned prior, nearly ever reputable RV lender in Canada is partnered with a dealership to provide bad credit loans. For example, with Revival Powersports RV Financing from our partners, you'll have access to a plethora of options to secure the best RV loan available while also understanding the costs involved with up-front fee transparency and monthly payment breakdowns. Some lenders only offer loans on towable trailers such as travel trailers, so ensure you inquire with the company that you are working with if you are looking for motorhome financing. Let's cover some tips and tricks to consider when you're shopping for RV loans in Canada.
- Avoid "guaranteed financing" like the plague. Nothing is guaranteed in this world, especially when it comes to financing your RV with bad credit. These businesses are simply using targeted marketing to try and get you into the door. If they are willing to make false promises; what else do you think they are trying to do? Answer - they are trying to take advantage of your credit history while milking every last dollar out of your approval as they possibly can while lying to you whenever it means that they might make an extra buck. The irony of it all is that these places typically offer the worst RV loans in the industry.
- Avoid places that offer in-house financing options. Similar to "gauranteed financing", most of the dealerships advertising 'in-house financing' are actually using the same lending networks as the other, more reputable RV dealers. There are very few RV dealerships that actually set up to offer loans directly as, while people associate the two markets as similar, providing RV loans and selling RVs are two completely different industries. The goal of these businesses is to make you believe that they have options in which you won't find elsewhere.
- Ensure that the RV dealer or loan agent has multiple lenders. This is key to ensuring you are getting the best rate. If the dealer or broker that you are working with is only aligned with one finance company, there is no way for them to shop for the best rate available.
- Never accept RV loans that penalize early payments. This one should be simple - if the lender doesn't allow you to pay off your loan early without penalty, shop elsewhere. They are not reputable.
So now that you are equipped with the knowledge and understanding of the basics of bad credit RV loans, what is next? Let's have a look at some tools we provide and ensure you are well aware of the true costs involved in the finance process.
Fees, Taxes & Beyond: Our RV Loan Calculator Can Help
When embarking on the journey of securing the best bad credit RV loan, doing your homework is essential. Researching the market, understand the terms of your loan agreement, and ensuring you're getting a fair deal is paramount to ensure that you aren't being taken advantage of. Our RV loan calculator is the only place online to get an honest to reality assessment of all of the costs involved with RV financing. Let's break down some of the fees that you will almost certainly encounter:
- Dealer Brokerage Fees & Markup - If you're financing through a dealership or online broker, expected to pay a markup on the cost of the RV that you find. This is because they are not making any profit on the unit that you are buying. Expect a markup around normal consignment fees in the range of 10% to 20%. This means that a $10,000 trailer will be at least $11,000 to finance.
- Dealer Documentation Fees - Whether you are financing direct at a dealership or online, you'll likely encounter a documentation free which is rolled into your loan. These usually start around $500 and can exceed $1500 depending on the outlet that you choose to finance with. This fee typically covers the cost for a dealer to process the loan, confirm ownership, run history reports and deal with insurances and registrations when required.
- Lender Administration Fees - Similar to a dealership doc fee, lender admin fees are rolled into the loan in nearly all cases. This is charged directly by the lender and typically non-negotiable. This fee must be shown in the documentation as part of the APR.
Bad Credit RV Loans: In Summary
As outlined, if you are approved by a reputable RV loan company and you find the perfect fit for your budget - RV financing is attainable, even with bad credit. By working with specialized lenders, understanding the process, and deciding if a higher rate is manageable - you can soon be adventuring through the stunning Canadian landscapes in your own RV. It is important to ensure that you're approved with a company that cares as much about your budget as they do the money you are spending. At the end of the day, it is always best to temper your excitement and make responsible financial decisions. We hope that we have helped to ensure that you are equipped with the tools and knowledge to make an educated decision. Happy RVing!