Cash is king, and so, particularly in these times, conserving money for emergencies and added unanticipated expenses makes good judgment. Paying cash for the possession of an RV depletes cash that could well be needed later on. That is why financing the purchase of an RV is the means to go, notably in these days of affordable interest rates. Using cash to pay for an RV turns that cash into an “illiquid investment,” not readily obtainable if and when the cash is desired.
There are some ways to finance the RV purchase. One way is to finance it by way of the RV dealer from which it is purchased. This manner of loan is named an “indirect loan.” The dealer will figure an interest rate for the loan, run the credit check and finalize all the document work, which is generally completed at the time of the purchase. Some time following the transaction, the dealer subsequently will sell the loan contract to a bank. The payments payable on the RV are subsequently sent to the bank, as the dealership no longer has any concern in the purchase contract.
An additional method to finance an RV purchase is by means of a “direct loan.” The RV buyer goes directly to a bank or credit union or other lender, such as an automobile loan company, and finances the RV “directly.”
Shopping around for the best rates to finance an RV purchase is crucial. Compare rates among banks, credit unions, and additional lenders. “Direct” loans can take longer for approval, as the borrower has to give whatever documentation the bank may require in order to verify whether to render the loan directly. Documentation typically 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 strictly a function of the particular lender. When comparing rates, inquire how long it takes for loan approval and if it is probable to have pre-approved for the purchase of an RV. Loan approvals typically are for up to a specified total and available for a guaranteed period of time. Being pre-approved makes the purchase of an Recreational Vehicle that much simpler and quicker.
When deciding whether to finance the Recreational Vehicle purchase, there could be a possible tax gain in doing so. Depending on whether the purchase is financed by use of a home equity line of credit or a home equity loan, interest can be deductible. So, in addition to comparing loan interest rates, talk to a tax advisor for the best way to structure the purchase of the Recreational Vehicle. Other potential tax advantages could apply in a unique situation.
Unless unquestionably flush with ready money, using that cash to purchase an Recreational Vehicle does not make good judgment. Interest rates for financing an RV are not much higher presently than the interest rates paid on money markets, certificates of deposit, and additional accounts where cash is stashed. Given the revival in the stock market, available cash may be better put to use there than to use up cash coffers to purchase that RV.
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