Henley Griffin, MBA

Securing financing for an RV can be a concern if you’re dealing with bad credit.

Traditional lending institutions may deem a low credit score as a riskier investment, which can make obtaining a loan more challenging but not impossible.

The good news is that there are financing options available that cater to those with less-than-perfect credit.

While the terms and interest rates may differ from those offered to individuals with stronger credit histories, understanding your budget and what you can afford is an important first step.

Your credit score plays a significant role in the financing options available to you, as it’s a measure of your financial reliability.

RV financing with bad credit might come with higher interest rates or require a larger down payment to offset the perceived risk to the lender.

Still, you’ll find that some lenders specialize in bad credit loans and may provide more flexible terms to accommodate your financial situation.

It’s essential to approach the process with a realistic perspective on what you can afford to ensure that your RV financing aligns with your budget.

Keep in mind that improving your credit score is also a feasible route to better financing options in the future.

Factors Affecting RV Loan Approval

When you’re on the hunt for RV financing with bad credit, it’s crucial to understand which factors lenders typically consider during the loan approval process.

Credit Score: Your credit score is a snapshot of your creditworthiness and plays a vital role in the lender’s decision-making process. If your score is above 600, you’re better positioned, but even with a lower score, you can sometimes secure financing—just be prepared for potentially higher interest rates.

Income: Steady income reassures lenders that you have the means to make payments. They’ll look at your job history and income documentation, such as recent W-2 forms, to gauge your financial stability.

Collateral: An RV loan is usually a secured loan, meaning the RV itself serves as collateral. If you default on the loan, the lender can take the RV to recoup losses. The RV’s value can significantly influence loan terms.

Bad Credit: Bad credit doesn’t necessarily bar you from getting an RV loan, but it does affect your options. With bad credit, focus on improving your chances by getting prequalified, demonstrating steady income, and choosing an affordable RV that fits within a reasonable budget.

It’s wise to get prequalified so you can shop with confidence, knowing what type of RV is attainable and what payments you can afford.

And if you discover that you can’t afford the payments, then it may mean you should stick with cheaper costing tent camping for now.

Consider offers from various sources, like banks, credit unions, specialized bad-credit financing companies, RV dealerships, or private sellers, to find the best loan for your situation.

Remember, the terms might vary, so pick the option that best suits your financial circumstances.

Challenges of Securing RV Financing with Bad Credit

Securing RV financing with a less-than-ideal credit score presents specific hurdles.

You’ll face challenges both in terms of the approval process and the conditions of your financing.

Impact of Credit Score on Financing

Your credit score is a crucial factor in the RV loan approval process.

A low score typically indicates to lenders that you’re a higher risk, which can:

• Prevent loan approval: Some financial institutions might not approve your RV loan application.
• Limit loan amount: You may not qualify for the loan amount required to purchase the RV you want.
• Restrict financing options: Fewer lending options could be available, forcing you to choose from less favorable terms.

High-Interest Rates and Fees

Bad credit often translates to more expensive financing for your RV.

Expect to encounter:

• Higher interest rates: Lenders will likely charge you higher interest rates as compensation for the increased risk they take on.
• Additional fees: You might have to pay extra fees, reflecting the administrative costs of processing loans for individuals with bad credit.

Remember, RV loans are a significant commitment, and the challenges associated with securing financing can impact your finances for years.

It’s crucial to weigh these factors carefully as you plan your RV purchase.

Types of RV Financing

When you’re looking for RV financing with bad credit, understanding the types of financing available can help you find a solution tailored to your situation.

Dealership Financing

Dealerships often offer financing directly on-site, which can simplify the purchase process.

RV dealers may have relationships with various lenders, allowing them to offer a range of financing options, even if you have less-than-ideal credit.

The interest rates for dealership financing can vary, so it’s important to review the loan terms and the APR (Annual Percentage Rate) carefully.

Bank and Credit Union Loans

Banks and credit unions are traditional sources for loans, and they offer RV financing as part of their product portfolios.

While banks might offer competitive interest rates, credit unions are known for their more personalized customer service and potentially lower rates for members.

However, you’ll often need a better credit score to qualify for these loans.

Online Lenders and Other Financing Solutions

Online lenders like Southeast Financial and My Financing USA specialize in RV loans and may provide more flexibility for those with bad credit.

These platforms can offer a quick application process and fast decisions.

Be mindful of the financing options they provide, ensuring you understand the terms, loan amounts, interest rates, and APR before committing.

Exploring Lender Options

When searching for RV financing, especially with a less-than-ideal credit score, it’s important to review and compare available lenders meticulously to secure a loan that aligns with your financial situation.

Comparing RV Loan Lenders

When comparing lenders for an RV loan, you’ll find that options range from traditional banks and credit unions to online lenders.

Each comes with different terms and interest rates, which are often influenced by your credit score.

For instance, interest rates can vary greatly—some lenders may offer rates as low as 4.29% for individuals with strong credit, whereas those with bad credit might face rates up to 24.99%.

You’ll want to consider factors such as:

• Loan Terms: The length of the loan and the monthly payment amount.
• Interest Rates: How much extra you’ll pay over the life of the loan.
• Down Payment: The initial amount you’re required to pay upfront; more might be required if you have bad credit.

Shop around and request quotes from multiple lenders, including:

• Local Banks
• Credit Unions
• Online Lenders specializing in bad credit loans

Bad Credit RV Loans

If you’ve got bad credit, don’t lose hope—there are lenders that specialize in bad credit RV loans.

These lenders look beyond credit scores and consider your entire financial situation, offering loans to those with lower ratings.

It’s worth checking with RV dealerships, which often have experience with customers with varied credit histories and may offer financing solutions directly or through their partnership with lending institutions.

Remember, securing a loan with bad credit might entail:

• Higher Interest Rates: You’ll likely face higher rates to compensate for the lender’s increased risk.
• Larger Down Payments: Providing more than the typical 20% down payment can improve your loan approval chances, and potentially affect your interest terms favorably.

Before applying, review your credit report for any errors and gather evidence of stable income to bolster your application.

Let your prospective lender know if you can provide a larger down payment or if someone can co-sign the loan with you.

Strategies to Improve Financing Eligibility

To secure RV financing with bad credit, focus on actions that enhance your appeal to lenders by showing responsibility and financial stability.

Improving Your Credit Score

Check Your Credit Report: Start by obtaining a free report from platforms like Credit Karma to look for any errors or discrepancies that could be negatively affecting your score.

If you find any, dispute them with the credit bureau.

• Pay Down Debts: Aim to reduce your credit utilization ratio, which is the percentage of credit you’re using compared to what’s available. A lower ratio reflects positively on your financial management skills.
• Settle Bills On Time: Consistently paying bills when they’re due contributes to a positive payment history, which can bolster your credit score over time.
• Avoid New Credit Lines: Every time you apply for credit, it generates a hard inquiry on your report. Too many hard inquiries in a short period can lower your score. Only apply for new credit if absolutely necessary.

Making a Larger Down Payment

Save for a Hefty Down Payment: Lenders see a larger down payment as a sign you’re less of a risk.

It demonstrates:

• Commitment: You’re investing a significant amount of your own money into the RV, which makes you less likely to default.
• Lower Loan Amount: It reduces the overall amount you need to finance, which can often secure more favorable loan terms and a lower interest rate.

Aim for a down payment that is substantial relative to the RV’s price—10% to 20% when possible, understanding that the higher, the better from the lender’s perspective.

The Role of Down Payments in RV Financing

When financing an RV, you’ll find that the down payment is not just a formality—it’s a key component of the loan process.

Required or recommended down payment amounts typically range from 10% to 20% of the purchase price.

Here’s how this initial lump sum affects your financing:

• Negotiating Power:
  • A substantial down payment might improve your bargaining position. Sellers often view buyers with larger down payments as more serious and financially stable, potentially leading to better terms.
• Loan Amounts:
  • The more you put down upfront, the less you’ll need to borrow. This can mean lower monthly payments and less interest paid over the life of the loan.
• Monthly Payments:
  • A down payment directly influences your monthly payments. A higher down payment generally results in more affordable monthly installments.

You should also know that if your credit history isn’t great, a substantial down payment might be especially important.

Lenders undertake more risk when financing someone with bad credit; a larger down payment demonstrates your commitment and reduces the lender’s risk, which might make financing possible where it otherwise wouldn’t be.

So, when you’re budgeting for an RV, don’t just focus on the sticker price.

Keep in mind that what you’re able to pay upfront can play a significant role in the overall financing equation.

Understanding Loan Terms and Conditions

When you’re looking into RV financing with bad credit, it’s crucial to understand the specifics of loan terms and conditions as they’ll dictate your financial commitment.

Interest Rates and APR

Interest Rates directly influence the cost of borrowing money.

The Annual Percentage Rate (APR) encompasses the interest rate plus any additional fees or costs associated with the loan.

As a borrower with bad credit, you’re likely to face higher interest rates, reflecting the increased risk to the lender.

To find the current interest rate for bad credit RV loans, it’s useful to check out multiple sources to get an average understanding.

Use a loan calculator to see how different APRs affect your monthly payments.

Loan Term Length and Repayment

The loan term length is the period over which you will repay the borrowed funds.

RV loan terms can vary widely, typically ranging from a few years to over a decade.

A shorter loan term means higher monthly payments, but you’ll pay less interest overall.

On the other hand, a longer term will lower your monthly payments but cost more in interest in the long run.

It’s important to choose a repayment plan that aligns with your budget while considering the total cost over the life of the loan.

Alternative Financing Options

When your credit isn’t stellar, you still have avenues to secure financing for an RV, whether it’s a motorhome or a travel trailer.

Two notable methods are personal loans and home equity loans.

Both options provide an opportunity for funding without relying strictly on traditional RV loans.

Personal Loans and Unsecured Loans

Personal loans can be a viable option for when you’re looking to finance an RV.

Since these loans are typically unsecured, they don’t require collateral like your home or RV.

Sofi is one of the known lenders offering personal loans which could be used to purchase an RV.

• Pros
  • No collateral needed.
  • Fixed interest rates.
• Cons
  • Higher interest rates compared to secured loans.
  • May have higher monthly payments.

Home Equity Loans for RV Purchase

If you’ve built up equity in your home, a home equity loan or a home equity line of credit (HELOC) can be another alternative.

You can leverage the equity in your property to secure a loan, often at a lower interest rate compared to unsecured loans.

• Pros
  • Lower interest rates due to collateral.
  • Possible tax benefits (consult your tax advisor).
• Cons
  • Your home is at risk if you default.
  • The process may be longer due to the need for home appraisals.

The Impact of Bankruptcy on RV Financing

When you’ve experienced bankruptcy, obtaining financing for an RV can be more challenging.

Lenders typically view a bankruptcy history as a higher risk, which might affect your ability to secure an RV loan.

It’s important to understand how this could impact your financing options, approval process, and potential interest rates.

After Bankruptcy: Your bankruptcy stays on your credit report for up to 10 years and could make lenders hesitant.

They’re mostly concerned with how recently the bankruptcy occurred and your financial activity since then.

• Financing Options: You may still find RV financing through certain lenders willing to work with individuals who have poor credit or a bankruptcy history. The terms, however, are often less favorable.
• Approval Chances: Getting pre-approved may help you gauge your ability to finance an RV and determine what terms might be available to you.
• Interest Rates: If you’re approved, you’ll likely face higher interest rates as lenders compensate for the perceived risk associated with your credit history.

Here’s a quick list to keep in mind as you navigate RV financing post-bankruptcy:

• Rebuild Your Credit: Take steps to improve your credit score with timely payments and reducing debt.
• Save for a Larger Down Payment: This can reduce the loan amount and may improve your chances of approval.
• Explore Different Lenders: Some lenders specialize in bad credit or post-bankruptcy loans.

Remember, it’s still possible to secure an RV loan after bankruptcy, but it requires diligence and possibly facing stricter terms due to the increased risk for lenders.

Money management has always been important, but today there seems to be a lot more options than there used to be.

Financial institutions operate both in-person and online.

Many options are only available online, and for people who don’t necessarily stay committed to a single place to live or work.

Taking care of your money mostly online is a great option.

Banks have done a lot with online banking over the years, but more and more credit unions are offering extensive online services.

Benefits of Credit Unions Vs. Banks

When you are choosing where to manage your money, you may ask whether a bank or a credit union is the best choice.

Profit Status

There are a lot of big high-profile banks that make it easy to find an ATM when you need it without having to pay a fee, but there are also some downsides of a traditional bank as well.

For one, banks are out to make a profit. This means they are more likely to charge higher interest on loans, and offer lower interest on savings and other investment accounts than a comparable credit union.

At the bank, your money works for the bank, at a credit union, you are the priority.

This means you can get better interest on loans, including student loans, they offer individualized debt consolidation, they offer resources to get educated about finances, so you get better with your money — rather than profiting from your errors with high fees. 

Credit Unions are non-profit institutions, and they take any money earned and give it back to the members.

People who manage money through a credit union are part of the credit union.

Credit union members also can often qualify for loans, or get better interest than those going through a bank.

How To Choose an Online Credit Union

Credit unions are not meant to be one size fits all, so it is important to put some thought into where you want to keep and manage your money to make sure you choose something that is a good fit.

When you become a credit union member, you become a co-owner of that institution, so it is important to pick something that you believe in.

Credit unions like for their members to have something in common, and some are more strict about your connection that others. Here are some things credit unions look for

The Industry you work in — Such as education, or another trade.

The company you work for — Many larger non-profits have their own credit union for employees

Where you live — Some credit unions are run by a certain city or state, or require that you reside in that state.

Your religion — Many strive to connection people of a similar faith.

Charitable Causes — Many credit unions are committed to advancing certain charities.

Family Connection — If a family member is a member, it is more likely you can be accepted as a member too, even if you don’t meet other requirements.

Look at Your Financial Goals

Before you join an online credit union, you should look at your financial goals.

Do you expect to buy or sell a home in the next few years? Do you need to save money so your child or grandchild can further their education?

Do you want to invest in a new business opportunity? Do you just want to earn a bit of interest with a checking or savings account?

What kind of minimum balance are you able to keep?

Knowing the answers to at least some of these questions can go a long way toward helping you choose the credit union that is best for you.

Be sure to look at plenty of options so you can weigh what works best for you.

If a specific credit union has attractive rates and features available, don’t be afraid to inquire, even if you don’t think it is an obvious fit.

Many credit unions have workarounds, or offer the option of donating to an important cause if they don’t otherwise seem like the obvious choice.

Consider How You Want to Access Your Money

There are some credit unions that may not have all the convenience of large banks, although many do have their own apps with plenty of bells and whistles.

Many offer debit cards, and will reimburse a certain amount of fees.

For some, it can be a benefit to actually work a bit harder to access money, because it may help some be more effective savers.

Best Online Credit Unions

Not sure where to start shopping for a new online credit union? Don’t worry, we can make some recommendations.

Here are some of our picks for the top online credit unions:

• Connexus – good for high interest checking account
• Alliant – good for high interest savings account and checking account
• Golden 1 Credit Union – good for student checking account

Final Word

Just like banks, credit unions are federally insured, so your money is safe. You’ll also be given voting rights in many cases, which helps you steer the direction of the institution.

Overall, credit unions are more personal.

They are known for their neighborly approach. You invest in them and they invest in you.

You might start with just a savings or checking account, and find that they are there for you when you buy a home or start a business.

Even if you have had an account at the same bank for a long time, it is worth your while to cultivate a new relationship with an online credit union.

As you might expect, your credit history and credit score are particularly relevant when you are trying to become a member of a credit union.

However, you might not have the best credit score for whatever reason, but you still want to join a credit union.

Bad credit is not necessarily something that will completely prevent you from joining a credit union, though.

Here are some tips for you if you want to join a credit union even though your credit score isn’t very good at the time you want to join. 

1. Check Your Consumer Banking Report

Contrary to what some people may believe, your credit score is not actually the primary factor that is considered when you are trying to open a deposit account with a credit union in the United States.

Your consumer banking report is actually more important. Your consumer banking report shows the history of all the bank accounts that you have had, to some degree.

ChexSystems has this consumer banking report on you.

The consumer banking report from ChexSystems shows any past bank accounts that have outstanding debts, have been reported for a certain reason, or bank accounts that have been mishandled in some way. 

2. Recognize that Credit Unions Require Membership

Credit unions are different from banks in a number of ways.

One of these ways is that banks have customers while credit unions have members and this is because a credit union operates as a non-profit organization while a bank obviously does not.

A credit union’s earnings go back to the members of the credit union.

This may come in a number of different ways, ranging from higher deposit rates and lower account fees to lower borrowing rates.

It is also important to keep in mind that credit unions each have their own set of criteria to figure out if you are eligible for membership or not. 

These can vary from credit union to credit union.

However, in most cases, these requirements focus on whether you live, work, or worship in a certain area or not.

Additionally, your affiliation or lack of affiliation with particular organizations, groups, or companies might also affect whether you are eligible to join a certain credit union.

As you might have noticed, your credit score is usually not a part of the considerations when you are trying to join a credit union.

This is part of how you can join a credit union with bad credit. 

3. Consider Second Chance Accounts

Even if your ChexSystems report is not ideal, that does not mean you cannot get an account with a credit union.

Second chance accounts are specifically made for individuals that do not have the most positive history when it comes to their past bank accounts.

Most of the time, second chance accounts are available in the form of some kind of checking account.

However, second chance accounts are certainly different from more traditional checking accounts in a few ways.

A second chance account will most likely include a monthly fee that cannot be waived, which is often not the case with traditional checking accounts. 

Another important difference is that you typically cannot write paper checks using second chance accounts.

You still may have the ability to use your second chance account for both transfers and online bill payments.

Despite this, you cannot give someone a check as payment if you’re using a second chance account.

The reason for this is simply that this decreases the chance that you will overdraft your account and get a negative balance.

Thankfully, quite a few credit unions offer you second chance accounts. Second chance accounts help you improve your credit, so you can use all of a credit union’s services once you join it. 

4. Credit Unions Do Care About Your Bad Credit Sometimes

As previously stated, bad credit does not prevent you from joining a credit union.

However, you might find it more difficult to take advantage of some of the services that the credit union offers if your credit score is poor.

Bad credit does matter if you apply for a credit line or a loan with a credit union.

Bad credit can decrease your chances of qualifying for various types of loans such as credit cards, personal loans, auto loans, mortgages, home equity loans, and lines of credit. 

In general, though, credit unions are often more willing to work with you to assist you in getting a loan that you need if your credit isn’t great compared to banks. 

5. Secured Loans Can Prove Useful

If you are concerned about your bad credit affecting your ability to join a credit union or get approved for loans, secured loans can help you.

Secured loans are loans that utilize the money you deposit in them as collateral. You don’t have to worry about bad credit affecting your ability to get a secured loan.

This is because secured loans are much less influenced by your credit score or even your income since your own deposit is used as collateral to secure the loan.

Secured loans are also known as credit builder loans. 

Secured loans are called this because they are a good way for you to improve your credit as long as you ensure that you are making your payments on time.

You should know that your credit limit may be the same as the amount of collateral you have and interest rates on secured loans are usually quite low.

After you have used secured loans to rebuild your credit, you now have a better chance of getting approved for various kinds of loans once you have joined a credit union. 

Final Word

If you are someone who meets the membership requirements for joining a particular credit union, then you shouldn’t have to worry too much about your bad credit getting in the way.

Bad credit might make it harder for you to get approved for loans, though. Quite a few credit unions will work hard to give you the financial services and products that you need even if you do have bad credit. 

It’s no secret; having bad credit is no good. Bad credit can prevent you from doing everything from renting an apartment to starting a business.

While building or rebuilding your credit obviously takes time, there are various tools that can help you propel your finances forward. For instance, credit unions are one resource that is often used by people with bad credit.

With that in mind, the following is a look at why that is. 

Why and How Credit Unions Help People with Bad Credit

If you are someone who has bad credit, you may be wondering why working with a credit union is more beneficial than working with a bank.

Well, there are a few reasons for this. Some of which are the following:

Nonprofit Institutions

One of the top reasons people with bad credit should use credit unions is that they are nonprofit organizations.

So, unlike major banks, which charge for virtually everything, credit unions do not need to do this, as they are not for profit, to begin with.

Therefore, the products and services being offered are there for the good of the members rather than the good of the organization. This makes it ideal for anyone with bad credit. 

Working with People who Care

One major reason you should work with a credit union to fix your bad credit is that credit unions actually care and want to help.

Unlike banks, which have the sole goal of making money, credit unions are operated by members of the community, for members of the community.

Therefore, credit unions often offer many services and products that are geared towards helping people build or rebuild their credit.

This makes them ideal for people with bad credit who are trying to rebuild. 

Small Loans

Yet another way credit unions help people with bad credit is by offering small loans. They are also typically more lenient in terms of the parameters for approving these loans. 

Small loans can not only help you pay off bills and build your credit that way but repaying a loan is a great way to boost your credit.

This is because consistently making payments on a loan shows that you are financially reliable and responsible.

So, if you can get a small loan and commit to making the payments, you will see a moderate increase in your credit score over the months. 

Lower Fees

Another reason people with bad credit should work with credit unions is that they carry lower fees.

No matter if you are doing an ATM transaction or getting a loan, the fees you have to pay at a credit union will almost always be lower than the fees associated with working with a major bank.

Moreover, they also typically have a much lower minimum requirement to open and maintain checking and savings accounts and rarely charge fees for those who fall under a certain threshold.

Since those who have bad credit are also often experiencing financial issues in general, working with a credit union is a great way to save and pay bills without worrying about the astronomical fees. 

More Personalized Customer Service

Working with credit unions also gives you access to more personalized services.

Not only are credit unions known for being smaller and more intimate, but they also allow members to receive more personalized care.

This means they take the time to meet with members, discuss their unique financial needs and issues, and recommend the best services and products to help them get ahead.

This is a vastly different experience from what you will get when working with most banks. 

Voting Rights

Additionally, working with a credit union also gives you a voice.

Unlike working with major banks, joining a credit union affords you the right to vote on major issues affecting the bank.

This means that you can potentially vote for or against new policies that may work in your favor or against you.

This is ideal for people with bad credit as they are often the least considered when it comes to making major decisions in financial sectors. 

Insured Deposits

Lastly, federal credit unions, in particular, are insured by the National Credit Union Administration.

With the help of the National Credit Union Share Insurance Fund, many credit unions are backed by the U.S. government, which covers individual deposits of up to $250,000.

Therefore, you can save your money and invest in financial products with the peace of mind of knowing that your money is backed by the U.S. government. 

Final Word

Overall, there are plenty of reasons why credit unions are great for people with bad credit.

Not only are they nonprofit institutions that help by offering small loans and other products and resources designed to help individuals create financial freedom, but they also show compassion for individuals, have governmental protections, and lower fees.

Moreover, they provide each customer with a level of customer service that is almost unheard of when it comes to dealing with major banks.

Therefore, if you are trying to build your credit and need help doing so, joining a credit union may be the perfect way to do so.