A caravan, RV or motorhome is a pretty exciting purchase. But it’s also a big investment – so you might not have quite that much cash to spare.
That’s why you might choose to take out a caravan loan to buy your caravan or camper trailer. There are a few ways you can go about it.
But first - what is a caravan loan?
A caravan loan is exactly what it sounds like: you borrow money from a lender, use the money to buy a caravan or similar vehicle, and pay back what you borrow (plus interest) in installments.
It’s a lot like taking out a car loan, so you’ll have to think about the same things. And since your new caravan, RV or motorhome is a valuable asset, you may be able to use it as security, which can make it easier and cheaper to get a caravan loan.
What vehicles can I buy with a caravan loan?
You can use your caravan loan to buy a caravan – or anything with wheels that you can camp in. That could be an RV, a motorhome, a camper trailer, a teardrop trailer, or a campervan. You could even buy a bus that’s been converted into a mobile home.
Where can I get a caravan loan?
Where you look for a caravan lender will depend on what kind of loan you’ve decided to apply for.
If you’re adding it to your mortgage, your only option is your mortgage provider, so you’ll need to approach them directly.
If you want a secured loan, there are a few ways to go about it. If you’re buying a new caravan the dealer may have a finance company they work with regularly, so you might be able to organise finance through them. This can be the easiest option – but not necessarily the cheapest, so it’s a good idea to check what they’re offering you against other options before you decide.
Alternatively, you can look online for a vehicle finance provider and contact them directly to find out what they can offer you. Again, it’s a good idea to check a few options and compare the cost and terms before you choose one. Make sure you find out what their valuation process is, too – since the caravan or RV you buy will be the security for the loan, they’ll need to agree that the price is reasonable, which can add a time-consuming extra step if you’re buying second hand.
You can also use an online comparison site to help you see at a glance what loans are on offer and what the costs and interest rates are. You’ll still need to check the terms and conditions carefully to be sure you’re making a fair comparison and getting the best deal for your circumstances.
If you don’t want the hassle of researching and comparing costs, you could also use a broker to help you find the right loan. They will contact lenders on your behalf, help you understand the true cost and terms and conditions of each product, and guide you through the paperwork. Generally, they earn a commission from the lenders for this service so you may not have to pay for their help, but make sure you are comfortable that they are reputable and independent – so that you end up with the loan that’s best for you, not the broker!
For a personal loan, the options are the same – do your research independently to find a lender (there are so many to choose from!), use a comparison site to narrow down the options, or work with a broker to find a personal loan that’s right for you. Applying for a personal loan is usually a quick and easy process that you can do online (unless you decide to apply to a bank), so you probably won’t need the help of a broker for that bit.
How much can I borrow?
Typically, caravan loans are between $10k and $150k, but there is no fixed minimum or maximum. Everything depends on your circumstances.
If you choose a secured loan, then the amount you can borrow will be directly linked to the value of the vehicle. The lender will expect to see (or make their own) valuation as part of the application process.
If you’re adding to your mortgage or taking out a personal loan, then the lender will decide
how much you can borrow based on how much they believe you can realistically afford to pay back each month.
How can I get the best interest rate?
The best way to get the best interest rate is to shop around! But make sure that you’re comparing the comparison rates and not the bare interest rates, as fees can make a huge difference to the overall cost of the loan. A loan with a super-low interest rate may have very high fees and charges that make it much more expensive overall.
In fact, what you should be asking yourself is, how can I get the cheapest loan rather than the lowest interest rate? Because a lower interest rate over a longer-term loan will often cost you more in total – especially if you’re paying regular admin fees too.
Terms and conditions are a factor too. Choosing a secured loan rather than a personal loan can lower the cost (because it’s less risky for the lender) – but you may end up having to comply with restrictions on the way you use your new motorhome, or be hit with early repayment fees if you want to pay it off early, outweighing any interest you’ve saved.
Tip: There is one thing you may be able to do to reduce the cost of your caravan loan. If you have any black marks on your credit record, see if you can get that cleaned up before you apply.
How can I apply for a caravan loan?
This depends on both the type of loan and the lender. If you’re adding to your mortgage, you’ll need to speak to the lending broker at your mortgage provider and follow their instructions.
Banks can be pretty slow-moving – but if your circumstances haven’t changed since you took out your mortgage the process should be streamlined, and you can expect to have an answer within a week.
For a secured caravan loan or a personal loan, you’ll need to fill out an application and send the lender documents to show your income and expenditure – such as pay slips, bank statements, and the agreements for any other loans you already have. You can usually do all this online (unless you’re working with a finance company through the dealer) and upload your documents too – a very quick and simple process.
The lender will then check your credit record and assess your application. If you’re applying for a secured loan, they ‘ll also need to see (or make their own) valuation of the caravan, RV, camper or motorhome you’re buying to decide how much you can borrow.
You can expect to get a response within 24 hours – or quicker – if you’re dealing with an online lender.
If you decide to go through a broker, you’ll usually start by meeting (in person or online) to discuss your needs. You’ll need to share all your financial information with the broker, and they’ll help you fill out applications or take care of them for you.
Brokers can take all the hassle out of finding and applying for a caravan loan and they’ll help you understand all the costs and conditions and help you choose – but they can take a few days to check all the options and get back to you.