RV Loan Approval Guidelines

How to understand the underwriting guidelines for RV loan approval.

Most lenders who specialize in RV loans will base their approval criteria on different factors than other loans, such as home mortgages and auto financing. Home and car loans are considered to be "necessities," while RV loans are considered to be more of a "luxury" type loan.

Even though statistics show that RV loans have a lower default and late payment percentage; these same statistics show that most people, when strapped for cash, will pay their "necessary" loan payments first. Because of these statistics, lenders will normally implement more stringent underwriting guidelines for RVs and even boats.

Many online financing sources specialize in RV loans, and it's your right as a consumer to find what is best for you. You should, however, be aware that each time you submit an application, your credit history may be pulled up from 2 to 4, or even more times.

But WHY Limit the Amount to $50,000 or More?

Since our processing costs are about the same, no matter if it is a $25,000 loan or a $250,000 loan. These costs, (and processing time), when added to the rates in loans under $50,000, would make us less competitive than some other sources.

You should be aware that many other online brokers will all be looking at many, if not all of the same lenders. These national and larger regional lenders, like our own, tend to specialize in amounts over $50,000, so be careful who you authorize to pull your credit reports if you submit an actual application.

Factors Considered in the Approval Process

The number one factor that impacts RV loan approval is Credit History. Most lenders will want a credit score of at least 640, but a score of 700 or better is more likely to obtain an approval at the best rate and most favorable terms.

The second factor considered is your Debt-to-Income ratio. This is basically your monthly revolving debt, (mortgage, auto, and credit card payments) divided by your monthly gross income. Most RV and marine lenders look for a maximum debt-to-income ratio of approximately 45% or less, however, some will go as high as 50% or more with excellent credit.

The third factor considered is the loan value of the RV. Each lender has their own formula for determining the amount they will loan on any particular RV. Most lenders will loan somewhere between wholesale and retail, depending on the previous factors listed above. Some will loan up to the RV's retail value on refinancing. Again, the better the credit history, the more flexible the lenders are likely to be.

Other factors are considered when determining your interest rate, such as the age of the RV and the total amount financed. The higher the loan amount, the lower the interest rate, with discount" break-points" commonly set at amounts such as $25,000 - $50,000 - $100,000, etc. Also, the older the unit, the higher the interest rate, although this may vary in rare circumstances.

Online RV Financing

Many online financing sources specialize in RV loans, and it's your right as a consumer to find what is best for you. You should, however, be aware that each time you submit an application, your credit history may be pulled up from 2 to 4, or even more times.

Each time a company accesses your credit report, it can result in 2, 3 or even 5 points deducted from your credit score. You should always avoid lenders or brokers who "shotgun" your application to numerous lenders, since this approach can increase the number of inquiries to your credit bureau report exponentially.

The best policy is to check rates with different financing sources without enabling them to pull your credit report until you are relatively sure you have found the company you would like to work with. At that time you should submit your actual RV loan application.