How much can I save by refinancing my existing RV loan?
The answer to this question depends upon several factors. It would depend on how much you could reduce your interest rate. It would also depend on your unpaid loan balance. You would need to weigh the potential savings against the closing costs... if any.
For example: If a loan with $50,000 remaining to be paid at 8.5% interest could be refinanced at 6.25%, you could save over $11,400 in finance charges over the term of a 15 year loan. You could also choose to lower your payments, or lower your repayment term. The choice is yours, but in the case of RV refinancing, there are usually very minimal closing costs. This means that virtually any savings in interest rate make refinancing a smart move.
What's your percentage rate?
Finance is a tricky business that can help you save thousands of dollars, or can sneak up and bite you in the behind. There is more to consider than interest rate and payments when financing any type of vehicle, although these are the two things that people usually focus on.
The first factor to consider is obviously interest rate. The savings of even a quarter to a half percent in interest rate can translate into thousands of dollars over the course of the loan. This will be one aspect of comparison between your dealer's F & I department and alternate sources of financing that are currently available.
The second aspect you must consider is term. In other words, how long will they finance the loan. This will directly effect your monthly payment amount. You should normally choose a long enough term to provide a comfortable payment, but not so long as to severely limit the amount of principle included in your payment.
Dealership vs. Bank Financing
Most banks are set up primarily to finance automotive loans with maximum terms of only 5 to 6 years. Because of constantly rising car prices, some banks and credit unions are now offering longer terms. Rarely however, will they go any longer than 7 years. Even if you are financing an RV, the same terms will apply. This can make for an extremely high payment.
This is where the RV dealer has an advantage. RV dealers are set up with lenders who finance recreational vehicles on a daily basis. In order to fit the payments into your budget, you can easily finance for 10, 15 or even 20 years. This can mean the difference between an affordable payment - and one that is difficult if not impossible.
Alternate Sources of Financing
With the emergence of the Internet, many specialized financing companies have gained prominence. Most of these companies specialize in recreational vehicle financing. This not only includes RV, but also boats, aircraft and other higher priced items.
The primary benefit of using a specialized recreational vehicle finance company is that you will nearly always secure a much lower interest rate. In many cases we have seen a savings of 1% to 2% over the financing rate offered by the RV dealer's finance department, or even the customer's local bank or credit union.
When using a specialized finance company, you should allow for a 5 to 7 day processing and funding period. Applications are normally taken by secure form on the Internet, with supporting documentation usually handled by fax. You will be required to provide a recent pay stub and your last 2 years W-2 forms from your tax returns. If you are self-employed or retired, you may be required to provide tax returns or proof of retirement income.
Remember, if you are purchasing or refinancing an RV you should always investigate your financing options to secure your best interest rate and terms. Even though specialized recreational vehicle financing take a little longer to process, it's usually well worth the wait. Don't let your impatience end up costing you thousands of dollars in finance charges.
Barry Wilder has been associated with his family RV business for over 25 years. He is currently the owner of Best Rate Financial Services, providing loans and refinancing for RVs, boats and aircraft. They also provide RV and Boat Warranties.
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