Refinancing

Benefits of Refinancing Your RV or Motorhome

Benefits of Refinancing Your RV or Motorhome
Benefits of Refinancing Your RV or Motorhome

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

While you might pay more over time if you extend the loan term, the smaller monthly payments might work better with your budget.

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

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.

Guide to Refinancing Your Boat

guide-to-refinancing-your-boat

Whether you're an avid fisher, enjoy water skiing or want to relax on the open water with your family and friends, you're glad that you bought a boat. One thing you might not be so thrilled about, though, is the loan you took out to afford to purchase the boat. Depending on your circumstances at the time of purchase, your boat loan might have a high interest rate. Alternatively, the monthly payments might not work with your current budget. 

If your current loan isn't working for you, you can refinance a boat loan to get terms that are a better fit for your current financial situation. Learn more about how a new or used boat refinance works and the numerous benefits of doing it. 

What Is a Boat Refinance?

A refinance takes place when you apply for a new loan and use the principal of that loan to pay off an existing loan.

A refinance takes place when you apply for a new loan and use the principal of that loan to pay off an existing loan. You can refinance a wide range of loans. For example, people who own homes can refinance their mortgages to take advantage of reduced interest rates or to cash out some of the equity in their property. People who have car loans might refinance to get a lower interest rate or to change the length or term of the loan. 

If you've been through the process of getting a loan for your boat, you're already somewhat familiar with the process of refinancing the loan. You'll need to go through the loan application all over again, providing information like proof of income and your credit history. The lender will make a decision about the interest rate to offer you and then you can decide whether you want to go through with the refinance or not.

A few types of refinance loans are available. The one that is right for you depends on your goals for refinancing and what you hope to get from the loan.

Boat Refinance Cash Out

One thing to keep in mind if you decide to refinance your boat loan for more than you currently owe is that you'll have to repay the full amount you borrow.

A cash-out refinance helps you pay off the existing boat loan and provides you with a little extra cash to use as you wish. For example, say you currently have $50,000 remaining on your boat loan and your boat is worth $100,000. With a cash-out refinance, you can borrow $75,000. The $50,000 will go towards paying off the principal on the first loan. You will then have $25,000 to use to make upgrades to the boat or to put toward other projects.

Since you end up borrowing more when you choose a cash-out refinance, you will most likely end up with higher monthly payments or need to make payments on the loan in the long run. For that reason, it's worth considering whether or not you can afford the higher payments or the extended repayment terms. A cash-out refinance can make sense when:

  • You have other loans with high interest rates: Let's say you have credit card debt and a personal loan, both of which have interest rates that are higher than the rate on your boat loan. If you refinance your boat loan for more than you owe on the current loan but less than the total value of the boat, you can use some of the extra cash to pay off your high-interest debt. You'll end up with one monthly payment and will save money over time.
  • You have expensive projects to complete: You might have renovation projects that you want to do around your home. On the other hand, you might want to do some work on your boat. With a cash-out refinance, you can use the additional loan amount to pay for those projects.
  • You want to build up an emergency fund: It's a good idea to have some money, usually about three to six months' worth of expenses, set aside in an emergency fund. If you don't have an emergency fund and want the peace of mind that comes with having some money set aside for a rainy day, getting a cash-out refinance will give you the money to stash in a savings account. 

One thing to keep in mind if you decide to refinance your boat loan for more than you currently owe is that you'll have to repay the full amount you borrow. The extra cash isn't "free" money — you'll need to pay it back over time with interest. 

Boat Refinance Rate and Term

If rates have dropped or your credit has improved since you got the first loan, a rate and term refinance allows you to take advantage of lower rates.

If you don't need access to extra cash when you refinance your boat loan, a rate and term loan might be a better option for you. With a rate and term refinance, you change the interest rate on the loan or the term of the loan, or in some cases, on both. For example, say your current loan has a remaining balance of $50,000 and an interest rate of 10%. The original term was 10 years. When you refinance the loan, you borrow $50,000 to pay off the balance on the first loan. The new loan has an interest rate of 8% and a term of eight years.

Some of the reasons you might choose a rate and term refinance include:

  • You want to pay less interest: If rates have dropped or your credit has improved since you got the first loan, a rate and term refinance allows you to take advantage of lower rates. 
  • You want more or less time to pay off the loan: Your financial priorities might have shifted since you first took out the loan. You might now want to focus on saving for retirement or paying down your mortgage. Refinancing lets you change the term of the loan, allowing you to spread out your payments. Conversely, you can shrink the repayment period if you want to be free of your loan faster.
  • You want a different monthly payment: Changing the rate or term of your loan, or both, means your monthly payment can increase, reducing the time it takes to pay off the loan. Alternatively, it can decrease, meaning you can focus on other financial commitments. 

Is Refinancing Right for Every Boat Owner?

Prepayment penalties aren't very common on loans anymore, but if your current loan has one, you'll have to pay a fee to pay it off early.

If you're wondering, "Can I refinance a boat loan?" then another question you might ask yourself is, "Should I refinance?" While there are many benefits of refinancing, it's not always the best option. If the following apply to you, refinancing might not be the right choice:

  • You make less now than when you bought your boat.
  • Your credit score has dropped.
  • Interest rates are the same or even higher than when you purchased your boat.
  • The cost of refinancing is more than you would save.
  • Your boat loan has a prepayment penalty.

Prepayment penalties aren't very common on loans anymore, but if your current loan has one, you'll have to pay a fee to pay it off early. The fee can be high enough that it eliminates any financial benefit of refinancing. 

If your boat loan is nearly paid in full, refinancing also might not make sense. You might be better off paying down the remaining loan and owning the boat free and clear. 

What Are the Benefits of Refinancing Your Boat Loan?

You might set more money aside for savings each month or pay more towards loans that have higher interest rates.

If refinancing seems like the best option for you and your boat, here are a few benefits of doing it:

  • Saves you money each month: If you refinance and end up with a lower monthly payment, you can adjust your budget accordingly. You might set more money aside for savings each month or pay more towards loans that have higher interest rates. If you've been having trouble making ends meet, a lower monthly payment can give you more room to breathe.
  • Lets you focus on other financial goals: Refinancing a boat loan can help you shift your financial priorities. For example, you might want to focus on building up your retirement fund. When you reduce your monthly boat payment, you have that option. Refinancing to consolidate your debts also helps you prioritize and shift your financial goals.
  • Can give you cash: If you go the cash out route when you refinance, you get a financial cushion, which you can use however you wish. You can deposit the cash in a rainy day fund, use it to pay for repairs or improvements on the boat or use it to pay down other debts.
  • Can help you get out of debt faster: Should you decide to change the term of your boat loan when you refinance, you have the option of speeding up the repayment process, meaning you'll be on the path to being debt-free sooner.

What Are the Drawbacks of Refinancing Your Boat Loan? 

Since there are many potential benefits and drawbacks of refinancing, it's a good idea to carefully weigh your options before you decide to move forward.

While there are benefits of refinancing a boat loan, there are also some potential disadvantages to consider: 

  • Closing costs can be high: You need to pay certain fees when you take out a loan, including when you refinance. Usually, you pay closing costs when you finalize the loan, which means you'll need to have the cash on hand to pay upfront. Depending on the situation, the closing costs can make it so that you don't save money when you refinance.
  • You can pay more over time: Extending the term of your boat loan by refinancing can mean that you have more breathing room when it comes to monthly payments. But lowering your monthly payment and taking more time to pay usually means that you end up paying more in the long run. You can use a boat refinance calculator to get an idea of your new monthly payment and to see how it compares to your current loan. 
  • You can get in over your head: Going the cash-out refinance route can seem appealing, as it gives you cash to spend as you wish. But it is possible to borrow more than you can comfortably afford to repay. Alternatively, if your income situation changes, you might have trouble repaying the new, more expensive loan.
  • It can interfere with your other financial goals: Depending on what you want from life, refinancing your boat loan might make it difficult to focus on your other financial goals. You might end up repaying your boat loan for longer than you had anticipated when you purchased the boat or you might find that the monthly payments make it challenging to save for other accomplishments, such as retirement, paying for your children's education or buying a new home.

Since there are many potential benefits and drawbacks of refinancing, it's a good idea to carefully weigh your options before you decide to move forward.

How Soon to Refinance a Boat Loan

Your credit score might need months or years to improve enough to allow you to qualify for a "good credit" boat loan.

Is there a right time to refinance your boat loan? It all depends on what's going on, both with your personal credit and financial situation and with the world in general. It could be the case that interest rates drop substantially a few months after you took out your first loan. If the drop is substantial enough, refinancing can help you get a lower monthly payment and reduce your total out-of-pocket costs. 

It might also be the case that refinancing doesn't make sense until you've made several years' worth of payments on your loan. Your credit score might need months or years to improve enough to allow you to qualify for a "good credit" boat loan

The best thing to do is keep an eye on the market, your finances and your current loan. That way, you'll get a sense of when rates are low enough that refinancing makes the most sense for you. 

Can You Refinance a Loan on a Boat With Bad Credit?

It's possible to get a boat loan when you have bad credit. But will you be able to refinance a boat loan if you have bad credit? It depends — if you took out your first boat loan and then struggled to make payments on it, you might have trouble refinancing it. But if your credit score is a little less than ideal and you've been making regular payments on your current boat loan, a lender might consider working with you on a refinance.

If you don't have the best credit, be prepared to pay slightly higher interest rates when you refinance your loan. 

How to Refinance a Boat Loan

Boat Refinancing Tips

You can do several things to make the refinancing process go as smoothly as possible. Here's how you can best prepare to refinance your boat loan:

  • Crunch the numbers: It's a good idea to look at how much you still owe on your loan, its interest rate and how much time remains in the repayment period before you start shopping around for new loans. Knowing what you're paying now and how much your current loan will cost you overall means you can compare its costs to the cost of the refinance. In some cases, paying more over time might work for you.
  • Know your numbers: Along with knowing how much you still owe and how much a refinance will cost, it's important to know your credit score before you refinance. Knowing your score gives you an idea of whether you're likely to get a lower interest rate on the loan or not. 
  • Know your boat: A lender might not let you refinance a loan on a boat that's more than 10 years old, so have the basic details about your boat down before you start the process. Your boat's market value also plays a part in refinancing. You usually can't borrow more than the boat is worth. If your boat has lost value since you purchased it and you haven't paid off much of your debt, you might not be able to refinance.
  • Know your other debts: Your debt-to-income (DTI) ratio matters when you want to refinance. If you've taken on more debts since you got your first boat loan, your DTI ratio might be too high to refinance. If that's the case, you can focus on paying down other debts before you try to refinance.
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How to Refinance Your RV or Motor Home

How to Refinance Your RV or Motor Home

Our guide to refinancing your RV loan will help you determine the best RV loan refinance strategy and how to refinance an RV loan. We’ll walk you through the most crucial steps involved in refinancing and help you avoid some typical mistakes people make when refinancing their RVs.

Reasons to Refinance an RV Loan

Refinancing, or “refi,” is a lending process that allows debtors to revise and replace an existing credit agreement to make it more favorable for them. When you refinance a loan, you’re essentially taking out a new, lower-interest loan to pay off the existing one. 

As someone with an RV or motor home loan, you may be wondering how you can take advantage of refinancing options to pay a lower interest rate, reduce your monthly payments or update the terms because your circumstances have changed.

Before deciding to go ahead with a refinancing agreement, considering your rationale for doing so will help you determine whether refinancing is a wise financial move now and for your future. Here are some of the primary reasons people consider refinancing loans for RVs and motor homes.

Better Interest Rates

The most common reason to refinance an RV loan is to take advantage of more recent and better interest rates. For example, let’s suppose you took out a 15-year RV loan 10 years ago at a fixed interest rate of 7.99%. Since then, lenders may have reduced their interest rates to offer more competitive financing.

Refinancing your current RV loan will allow you to pay off your existing balance at a lower interest rate. This strategy will help you save on the total amount of interest you would have otherwise paid over the remaining five years of the loan term had you maintained your original agreement. Instead of throwing this money away on interest payments, you can use it to pay down your loan quicker, provided there aren’t penalties for early repayment.

Lower Monthly Payments

In many cases, RV owners want to refinance their loans to obtain a lower monthly payment. This situation often happens when families take on new or unexpected expenses or have a reduced household income, and they need room in their budget to ensure they meet all their financial responsibilities. 

When refinancing an RV loan to help reduce your monthly payments, you’re effectively taking on a new loan with a longer term to lessen your monthly burden by stretching out the principal over more time. The downside to this approach is that you’ll pay more in interest, which gets accrued over an extended period. The upshot is that you’ll have a much more manageable monthly payment from here on.

Changing RV Use

By negotiating a longer loan term, you can effectively convert your RV loan into a mortgage, whereby you’re now paying toward a long-term home.

Another reason to consider refinancing your RV loan is that its principal use has changed. Perhaps when you first bought your RV, you had a more generous household income, and you used the RV primarily for recreational purposes. In this case, you may have financed the loan over a shorter period, with higher monthly payments toward the principal. Since then, you’ve had a change in circumstances, and you’ve decided, like many people, to permanently embrace an on-the-road lifestyle.

Since your RV has now become your primary residence, you might consider refinancing your loan to extend the term. By negotiating a longer loan term, you can effectively convert your RV loan into a mortgage, whereby you’re now paying toward a long-term home. This tactic also helps free up funds you can use elsewhere during this transitional time.

Improved Credit Score

If you’ve been working diligently to improve your credit score — perhaps by increasing your household income, paying down credit card debt or paying off student loans — refinancing your RV loan may be a wise move. Even developing better credit habits over the years, such as paying your bills on time and never missing payments, can dramatically improve your credit score enough to warrant refinancing.

When you have a higher credit score, a refi lender might work with you to obtain a more favorable loan agreement because you’re a lower-risk debtor. In this case, you’ll likely secure a lower interest rate than you originally had when your credit score was worse. Now, you can save on monthly interest payments, helping you free up cash for other obligations or pay off your refinanced RV loan sooner.

How to Refinance an RV

Determine the New Loan Amount

The first thing to do when starting the refinancing process is to find out how much new credit you need. Contact your existing RV lender to find out how much you still owe on your RV loan. This amount will roughly determine the amount you'll seek from your new lender or loan.

At this point, you will also need to tell your lender about your intentions to seek refinancing. They may be able to help you refinance or warn you of any reasons refinancing right now isn’t a good idea. If your original credit agreement stipulates penalties for early repayment, you’ll also want to learn what those are and how to pay them.

Compare Refinancing Lenders

Your current lender will probably try to work with you to figure out an excellent refinancing deal, since they don’t want to lose you as a customer. However, you owe it to yourself to weigh all your options. Start shopping around for new lenders. Look for ones who specialize in RV, motor home, boat and utility vehicle lending. These lenders often work with RV owners to refinance. They can usually negotiate much better interest rates than traditional banks and credit unions, due to their borrowing power in a niche market.

When comparing refinancing lenders, consider the following:

  • What interest rate are they willing to offer?
  • How long is their average term length?
  • Are there any tax credits or home equity loans available if you live at least part-time in your RV?

If there are potential tax implications because you plan to live in your motor home, consult a tax adviser before making any refinancing moves.

If there are potential tax implications because you plan to live in your motor home, consult a tax adviser before making any refinancing moves.

Have Your RV or Motor Home Appraised

Before refinancing your RV loan, it’s crucial to have your asset appraised — particularly when you’re refinancing to lower your monthly payments and extend your loan term. Many people who extend their loan term end up with negative equity on their asset, also known as being in an upside-down loan. This phenomenon happens when the remainder owed on the loan exceeds the RV's actual market value. 

Because RVs are depreciating assets, their value drops each year. If your RV’s depreciation rate exceeds the rate at which you’re making payments, it can put you at risk financially. Should life’s circumstances change, and you need to sell your RV and pay off the loan, it would cost you more to do so because you’d also owe whatever loan balance the sale couldn’t cover.

The market standard for RV values is the NADA Guide. You can find your RV value using the NADA Guide online at www.nadaguides.com/rvs. Your lender will most likely request a copy of the NADA report on your RV during the refinancing process.

Fill out a Loan Application

Once you’ve selected the lender you want to go with for your refinancing, ask to obtain a loan application. These are usually online, but you may also be able to request a paper copy or print one out. When you first receive the loan application, read the terms and conditions thoroughly before filling out the application. Make sure you have your loan officer’s contact information and reach out to them about any parts of the agreement you don’t understand or aren’t comfortable with. You can find My Financing USA's refinance loan application at www.myfinancingusa.com/rv-loans/apply.

Once you’ve clarified all the loan conditions, begin filling out the application with the required information first. If you need to contact your bank, your employer, the original lender or another party to complete the required sections, you should do so right away. 

Submit your loan application according to the lender’s instructions. Remember that the lender will need to verify your credit history to process your application, which may briefly impact your credit score depending on their process. Only apply once you’re sure about it.

Pay off the Previous Loan

Once the financing organization has approved your application, the next step is to pay off the original RV loan. When you have the funds, contact the original lender and arrange a final payment to finalize the loan and close out the account. At My Financing USA, we work directly with your lender to complete this for you.

To begin making your new payments on time, change any calendar reminders you have to match the new loan schedule. If you pay your bills using automatic bank withdrawals, be sure to set up a new account and automatic payment setting, so you never miss a payment.

Update the Title

The final step to refinancing your RV loan is to change its title. In most cases, the lender will take care of this process by releasing the old lien against the title and adding the new one.

If the new lender doesn’t update the title or you’re unsure about its status, you can contact your state’s motor vehicle department to check. They can also help you change the title if you confirm it hasn't switched over yet. My Financing USA works directly with your local or state title offices to complete the title change for you.

Tips for Finding the Best RV Loan Refinance Option

Tips for Finding the Best RV Loan Refinance Option

The most challenging part of refinancing your RV loan is choosing the best company to refinance an RV loan. There are hundreds of options to choose from. From banks and credit unions to dealerships and brokers, refinancing your RV loan can happen in many ways. 

When comparing refinancing options, it’s essential to know what to look for, what makes a good lender and how to pick the best deal. Here are some tips on how to find the best place to refinance an RV loan.

  • Compare different term options: As you know from your original loan agreement, RV loan terms typically range between 10 and 15 years. When looking for your new lender, you’ll want to compare different loan terms and calculate your total costs based on various lenders' interest rates. In general, you’ll want to find the one that proposes the lowest monthly rate over the shortest time.
  • Have your credit report ready: When you shop around for the best company to refinance your RV loan, have your credit report ready, and ensure you understand your credit score. By knowing what makes you an attractive borrower to lenders, you can negotiate better rates. If you need to, spend a couple of months boosting your credit rating before approaching lenders for refinancing to put yourself in the best possible position to secure a deal.
  • Watch for early payment penalties: Early payment or prepayment penalties are fees lenders charge borrowers for paying more than the additional payments allowed toward the loan. This practice is more common with mortgages and car loans, but they may still exist for RV refinancing loans. Be aware of this possibility and try to choose a lender that doesn’t charge this penalty.
  • Avoid hidden fees: Application fees, brokerage fees, processing fees and underwriting fees are all typical in personal lending. When shopping for the best company to refinance your RV loan, you’ll want to choose one with the smallest, most transparent fees and the lowest rate.
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