Cash is king, and so, notably in these times, setting aside currency for emergencies and other unanticipated expenses makes sense. Paying cash for the acquisition of an RV depletes currency that can well be needed later on. That is why financing the acquisition of an RV is the path to go, notably in these days of affordable interest rates. Using cash to get an RV turns that cash into an “illiquid investment,” not promptly available if and when the cash is desired.
There are some ways to finance the RV purchase. One method is to finance it through the RV dealer from which it is bought. This category of loan is named an “indirect loan.” The dealer will figure an interest rate for the loan, run the credit check and carry out all the document work, which is generally prepared at the time of the purchase. Some time after the deal, the dealership then will sell the loan contract to a bank. The monthly payments scheduled on the RV are then sent to the bank, as the dealership no longer has any interest in the purchase catch.
A different method to finance an RV purchase is by a “direct loan.” The RV buyer goes directly to a bank or credit union or additional lender, such as an car loan business, and finances the purchase “directly.”
Shopping around for the lowest rates to finance an RV purchase is critical. Compare rates between banks, credit unions, and additional lenders. “Direct” loans can take longer for approval, since the borrower has to provide any documentation the bank may need in order to decide whether to render the loan directly. Documentation usually includes pay stubs, a financial statement, a credit check, and if self-employed, some years of tax returns. How long it takes for loan approval is truly a function of the individual lender. When comparing rates, ask how long it takes for loan approval and if it is likely to get pre-approved for the purchase of an Recreational Vehicle. Loan approvals frequently are for up to a particular total and good for a certain period of time. Being pre-approved makes the purchase of an RV that much easier and faster.
In deciding whether to finance the RV purchase, there may well be a potential tax advantage in doing so. Depending on whether the purchase is financed by help of a home equity line of credit or a home equity loan, interest can be deductible. So, in addition to comparing loan interest rates, consult a tax advisor for the most economic way to arrange the purchase of the Recreational Vehicle. Other potential tax advantages can apply in a specific circumstance.
Unless completely flush with ready money, using that cash to purchase an RV does not make sense. Interest rates for financing an RV are not much higher presently than the interest rates paid on money markets, certificates of deposit, and other accounts where cash is placed. Given the improvement in the stock market, available cash may be better put to use there than to lessen cash coffers to purchase that RV.
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