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 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.
1. Myth: All RV dealers and lenders will try to rip you off
Truth: While it's essential to be cautious, many dealers 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 Of course, there are plenty of bad actors out there who would do anything for an extra buck and also many outdated dealers that still thrive on the pressure sale.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 innevitably 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 ever second of every day, will flourish. As always - research thoroughly, read reviews, and understand the terms before you commit.
Pro Tip - If your salesperson seems aggressive, condescending or is pushing aftermarket products as a must-purchase, run.
2. Myth: If you give your RV back instead of having it repoed, it's better for your credit.
Truth: Nope. Both voluntary surrender and repossession will likely have a similar negative impact on your credit score 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 sugest 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 direct to discuss. While it may be tough to swallow your pride, most lenders do not want to deal with the repo man either.
3. Myth: You can shop around to find a better interest rate
Truth: While it may be true in some cases, most RV dealers share the same finance companies and private lenders as eachother. 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 eachother for the best rate.
4. Myth: It is difficult to finance an RV with bad credit
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. Myth: A good credit score will always mean a great rate
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 occuring, 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. Myth: A short term RV loan is better than a long term one, so you should always take the higher payment
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. Myth: There are places that offer guaranteed financing
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 stealerships look to prey on the vulnerable who might barely snag an approval and will simply ghost applicatns 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. Myth: There's always a zero down option if you look hard enough
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 eachother.
9. Myth: Interest rates should be comparable to your car or truck loan
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. Myth: A Co-Signor will help get you a better rate every time
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 signifcant rate increase, if at all.
Pro Tip: Watch out for dealers who try to move the entire loan into the co-applicants name.
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!