RV Loan Mistakes That You Must Avoid

Author: Jim Johnson


Deciding which motorhome or RV to buy often is only part of the
buying process at hand. Actually, more money can be lost on
making the financing arrangements than almost anywhere else in
the deal. If you have the money to pay cash for a motorhome,
then financing isn't even an issue, but with the rising cost of
new and even used RVs, motorhome loans are a necessary part of
the sale for many.

There are some mistakes that are commonly made that can cost you
dearly if you don't take steps to avoid them and here they are:

1. Don't focus on the monthly payment figure alone to determine
if you can afford a particular motorhome model. This is often
done by car buyers too, but the monthly payment is only part of
the whole loan picture. You need to take that monthly payment
figure and multiply it by the number of months that the loan
contract is in force. Once you have that figure, then compare
the final cost of the loan contract with the cost of just buying
the rig itself. Usually this will be an eye-opening exercise and
can help you see if exhorbitant interest is being charged on
this loan. If you find that you are paying almost as much in
interest as you are for the motorhome itself, you may be better
served to either look at something much less expensive, or make
different financing arrangements.

2. Avoid any financing that is not a simple interest loan.
Lenders have all kinds of tricks up their sleeve to get more
money from lending to you and one of the ways that has been most
detrimental to consumers is by writing a contract that doesn't
allow you to start paying down the principal amount of the loan
in any meaningful way until the loan is in it's final stages.
It's called frontloading the interest and what it means is that
most, if not all, of the money that you pay for the first half
or so of the loan only goes toward the interest, not the
principal. So when you decide to sell, you will still owe them a
huge chuck of money and they make a lot more profit with this
kind of loan.

It's best to avoid any loan that is not based on a simple
interest process. In other words, the interest is a set part of
the monthly payment from the very first payment all the way
through to the end of the loan period. If a lender tells you
that you can't qualify for a loan like that, never take their
word about that. Always shop around and get other loan quotes on
your own. Most often you can come up with a better financing
arrangement by doing that anyway.

Getting a motorhome loan doesn't have to be costly or mysterious
if you just watch what is going on and keep your eye on the
bottom line.

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