Navigating the world of RV financing can feel like riding a bicycle up a mountain, especially with the various generalizations and myths that circulate about this process. We've been in the RV financing industry for a long time now and have heard it all, from the bold takes to the near truths. To help you make more informed decisions, we're diving deep into the sea of RV financing to investigate 10 of the most common myths about RV financing. We'll cover all the questions as to how to get a RV loan in canada, when to trust your RV dealership, and how the best rates in Canada are offered.
1. The Myth: All RV dealers and lenders will try to rip you off
The Truth: While it's essential to be cautious, many RV dealerships and lenders are reputable and trustworthy. Major manufacturers typically perform thorough audits of dealers to ensure that they are following brand philosophy. Of course, there are plenty of bad actors out there who would do anything for an extra buck and also many outdated dealers that still thrive on the pressure sale. These dealers will inevitably find their fate while, at the same time, the handful of dealers that are moving into the future and understand that knowledge is at our fingertips every second of every day, will flourish. As always - research thoroughly, read reviews, and understand the loan terms before you commit.
Pro Tip: If your salesperson seems aggressive, condescending or is pushing aftermarket products as a must-purchase, run.
2. The Myth: If you give your RV back instead of having it repoed, it's better for your credit
The Truth: Nope. Both voluntary surrender and repossession will likely have a similar negative impact on your credit history when it comes to a lender reviewing your previous credit history. This is why you should always consult with a financial advisor before making this decision and never trust the lender or dealer when they suggest that "giving it back" will have a better impact on credit score.
Pro Tip: If you're in a tough financial situation, reach out to the lender directly to discuss. While it may be tough to swallow your pride, most lenders do not want to deal with the repo man either.
3. The Myth: You can shop around to find a better interest rate
The Truth: While it may be true in some cases, most RV dealers share the same finance companies and private lenders as each other. With that in mind, shopping around may adversely hurt your credit and cause a credit score drop as numerous credit pulls occur. On the other hand, a less-than-honest dealer could be inclined to try to sell you a higher interest rate in favor of kickbacks to them from the bank.
Pro Tip: Consider a local or online dealer broker who limits the number of credit checks against you, but will also shop all possible lenders and bid them against each other for the best rate.
4. The Myth: It is difficult to finance an RV with bad credit
The Truth: Though it might be challenging, it's not impossible. There are Canadian RV lenders who specialize in providing RV loans for people with bad credit. Some might even report to credit which could allow you to build some positive payment history while enjoying your purchase.
Pro Tip: Ensure that the dealer or lender you're working with does not charge any prepayment penalties. This will allow you the opportunity to refinance your bad credit RV loan at a lower rate down the road.
5. The Myth: A good credit score will always mean a great rate
The Truth: A good credit score is a positive, and the perfect starting point to obtaining the best RV rates available. That being said, lenders in Canada take several factors into account when assessing the rate they offer. This could include, but is not limited to, the amount of debt you currently have taken out, the quantity of installment payments you have occurring, your credit card optimization, current market fluctuations and current employment risks and stability.
Pro Tip: If you're only accepting of the top-tier rate options, pay down your current debt before applying to show that you're financially secure.
6. The Myth: A short term RV loan is better than a long term one, so you should always take the higher payment
The Truth: This entirely depends on your personal financial situation. While it is true that you will pay less interest on a short term RV loan, the higher payments could strain your budget. Consider how a larger payment could impact in an unfortunate situation such as job loss or a major expense. Factor in how long your reserves could stay intact in the event of unemployment over a period of time.
Pro Tip: Involve a financial consultant when possible and spend the time budgeting appropriately.
7. The Myth: There are places that offer guaranteed financing
The Truth: This is entirely false in every circumstance. While some places may advertise "guaranteed" financing, there's always a catch, and in most cases it is an outright lie. Many of these RV dealerships look to prey on the vulnerable who might barely snag an approval and will simply ghost applicants who are declined. It is important to understand the terms and pitfalls before opting for such options.
Pro Tip: Avoid any dealership who offers any guarantee like the plague.
8. The Myth: There's always a zero down option if you look hard enough
The Truth: While zero down options absolutely exist, they are never a guarantee. No matter what a dealership advertises, there are no 100% zero down RV lenders in Canada. It is entirely subject to your approval. Full stop.
Pro Tip: While zero down options are not guaranteed, the best bet to obtaining one is through an RV loan broker with access to multiple lenders who can shop them against each other.
9. The Myth: Interest rates should be comparable to your car or truck loan
The Truth: This is often untrue as RVs are generally considered luxury items, and they have different risk profiles and depreciation rates compared to cars. Typical average recreational loans are at minimum 2-3% higher than most car dealers can offer. For more information, check out our article comparing automobile loans to RV loans.
Pro Tip: Watch out for dealers who advertise extremely low rates as they often have catches. The rate may only apply for a portion of your total term or may require a significant down payment.
10. The Myth: A Co-Signor will help get you a better rate every time
The Truth: A co-signor with good credit can potentially help, but it also puts their credit at risk. Moreover, your own credit and financial situation still plays a significant role. In most cases, you will not see a significant rate increase, if at all.
Pro Tip: Watch out for dealers who try to move the entire loan into the co-applicants name.
The Truth About Dealership Doc Fees
To facilitate your RV loan approval in Canada there will likely be added fees on top of the cost of the new RV that you're buying. Whether you obtain your loan online or visit a local dealer, it is important to inquire about additional fees involved in the purchase process. While any reputable source will disclose prep fees up-front prior to running a credit check, there are horror stories indicating that many dealers do not. If you discover hidden fees that weren't mentioned earlier rolled into the final price of your RV, it may be best to shop elsewhere.
Our partners at Revival Powersports offer a private sales RV loan calculator which includes all of the fees that they charge rolled into the price of your new RV. This ensures that you understand the full cost that you can expect to be paying prior to purchasing your trailer.
Preparing for the Unexpected: RV Loan Flexibility and Safety
When financing your dream RV, it's essential to consider the flexibility and safety of your loan terms, especially given how life’s uncertainties can impact your financial situation. Choosing an RV loan with flexible payment options can provide significant security and peace of mind. Financial institutions often offer a variety of loan terms and payment plans, which can include bi-weekly or semi-monthly options that suit your budget and cash flow. Ensuring that your loan has these flexible terms can help accommodate unexpected changes in your financial landscape, such as job loss or unexpected expenses.
Key Tips for RV Loan Flexibility and Safety:
- Opt for loans with no prepayment penalties: This allows you the freedom to pay off your loan early without incurring extra costs, providing an option to reduce interest payments if your financial situation improves.
- Seek loans that offer payment deferral options: Some lenders may offer the ability to defer payments during financial hardships, ensuring you don’t fall behind during tough times.
- Confirm the flexibility of payment amounts: Depending on your lender, you might be able to adjust the payment amounts as your financial situation changes.
- Consider the security of loan coverage: Look for loans that include life or unemployment insurance which can cover payments or the remaining balance under specific conditions.
Ensuring that your RV financing is equipped to handle the ebb and flow of life’s financial demands not only safeguards your credit but also secures your investment in your RV over the long term. As you move toward finalizing your RV purchase, remember that the right financing plan is crucial. It should provide not just competitive interest rates and favorable payment terms but also the flexibility to adapt as your needs and financial situation evolve. This approach to RV financing will help ensure that you can enjoy your new home on wheels without the constant worry of financial strain.
Remember, every journey starts with a single step. By debunking these myths, you're one step closer to making an informed decision about your RV financing. And don't forget to use our handy RV loan calculator - the only honest one on the web! Enjoy the freedom and flexibility of the open road. You deserve it!
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