You bought an RV in the hopes of vacationing on the road and always having a comfy place to stay wherever your trip takes you. To afford the purchase, you might have taken out a loan. Now, a few years have passed, and you're wondering if you're really getting the most from your RV loan. Interest rates might have fallen, or the payment might not work for your budget anymore.
The good news is you can refinance your RV loan. Is getting a new loan the right choice for you? Learn more about the refinancing process below and decide if it's right for you.
Should You Refinance Your RV Loan?
When you refinance a loan, you replace the existing loan with a new one. The new loan might have different terms, monthly payments and interest rates. Usually, people decide to refinance because doing so improves their financial situation. You might end up with a lower payment, or you might get a lower interest rate, meaning you pay less in the long run. To decide whether refinancing is right for you or not, ask yourself:
1. How Has My Credit Changed?
It could be that you bought your RV and took out a loan when your credit was lower than it is now. Although you qualified for a loan before, you might qualify for better terms now. For example, you might be paying a higher interest rate, and refinancing would let you pay a lower interest rate. If your credit has improved over time, refinancing can make sense.
2. Have Interest Rates Changed?
Interest rates can drop and increase over time. If you bought your motorhome when rates were high, you might get a lower rate if you refinance, helping you save money.
3. How Much Is Your RV Worth?
Ideally, you'll owe less on the loan than your RV is currently worth. If you owe more than the value of your RV, you might have trouble refinancing.
4. How Old Is Your RV?
The age of your motorhome or the amount of wear and tear on it can also influence whether you should refinance your motorhome loan. You might not be able to refinance an RV that's very old or that has many miles on it.
5. How Long Has Your RV Loan Been Open?
Lenders usually require at least 12 months of on-time payments showing on your credit report before the loan is eligible for refinancing. If you attempt to refinance your loan in less than 12 months after opening, you risk placing extra hard inquiries on your credit for nothing.
6. Is There a Prepayment Penalty on Your Loan?
Some loans charge a fee if you pay more than the agreed-upon amount each month. If you completely pay off the loan early, you can get stuck with a hefty fee. Before you refinance, verify that your current loan doesn't have a prepayment penalty.
Benefits of Refinancing an RV or Motorhome Loan
If refinancing looks like the right choice for you, or you're still unsure, consider the benefits of getting a new loan.
1. Change Your Monthly Payment
Incomes change over time. When you first took out your RV loan, you might have earned more or less than you do now. It could be the case that you can easily afford a higher monthly payment on your loan, meaning it makes sense to refinance to a loan with a shorter term.
It could also be the case that your income has dropped, or you have more financial obligations today than you did when you first took out the loan. Refinancing to extend the term of your RV loan can mean you get a lower monthly payment. While you might pay more over time if you extend the loan term, the smaller monthly payments might work better with your budget.
2. Reduce Your Interest Rate
There are a few reasons why you might not have the best interest rate on your existing motorhome or RV loan. You could have purchased the RV when interest rates were up. Or your credit might not have been what it is today. Often, lenders charge people with lower credit scores higher interest rates to protect themselves from risk.
If you can get a better rate on an RV loan today, refinancing can make sense, especially if you have several years left on the loan. You can use our calculator tool to see how your monthly payment will change if you get a new loan with a lower interest rate.
3. Improve Your Budget
Changing your monthly RV payment can help you get a better grasp of your budget. For example, say you want to save for retirement and struggle to set aside a certain amount each month. Or, maybe you're hoping to build up an emergency fund. If your credit score has improved and you'll be offered better interest rates, you can refinance an RV loan so that your monthly RV payment drops. Then, you can use the money that would have gone towards your loan payment to help you reach another savings goal.
4. Remove a Co-Signer
Some lenders ask people with lower credit scores or who might not have high enough incomes to add a co-signer to their loans. A co-signer agrees to take on responsibility for the loan, along with you. If you can't make payments on it anymore, the co-signer will need to pay. If you stop paying the loan, the co-signer's credit can take a hit. In addition to being responsible for the loan, co-signers are also joint owners of your RV.
You might have needed a co-signer when you first got your RV loan, but your income or credit might have improved enough that you no longer need them. Or, it could be that the co-signer no longer wants to be on the loan with you. Refinancing allows you to get a new loan and to remove your co-signer from any financial obligation.
5. Get a Loan That Works Better for You
One last reason you should refinance your motorhome loan is that doing so means you can get a loan that works better for you. You might want a loan with a shorter or longer term or with a lower interest rate. Taking the time to refinance can mean that you end up with something that better meets your needs and lets you work on other financial goals, all while enjoying time spent in your RV.
Finance or Refinance an RV With My Financing USA
My Financing USA can put you in contact with the best RV loan programs nationwide. We offer fast and easy approval and use a process that reduces credit inquiries to keep your credit score intact. Apply for an RV loan in minutes today, or get in touch with us to learn more about refinancing options from our friendly, personalized customer service team.