Motorhome Basics | FMCA
Before you can be approved to finance a new or used motorhome, the lender will run a credit check. Before starting the motorhome purchasing process, it's wise to obtain a copy of your own credit report for your review. Your credit history might affect your ability to obtain credit. Reviewing your credit report beforehand might also expose mistakes or misinformation on your report that you can correct before applying for a loan.
Companies that can provide a credit report include Experian (800-397-3742), Trans Union (800-888-4213) and Equifax (800-685-1111). You can also access your credit history through Equifax and Experian. A fee is charged for these services.
What are FICO scores?
FICO scores are a type of credit score developed by Fair Isaac and Company to determine the likelihood that borrowers will pay their bills on time. FICO scores are widely accepted by lenders as a reliable means of credit evaluation. This score compiles your credit history into a single number that is then evaluated by your lender before the loan is approved. Your FICO score may reflect late payments, employment history, the length of time credit has been established, the amount of credit used versus the amount of credit available, the length of time at your current residence, and negative factors such as bankruptcies, charge-offs (a non-performing asset that is written off the books for non-payment), and collections.
How can I find the best lender and rate?
Financing programs are available through your local bank, savings and loan, finance company, credit union and motorhome dealers. Many banks, credit unions and other loan institutions will offer competitive rates on your loan.
First check with several lenders and research their loan programs. Many dealerships also can choose a lender for you and help set up a program that best meets your needs. Typically, many financial institutions view the motorhomer as a very reliable customer. Consequently, motorhome loan terms and monthly payments often are more flexible compared to other types of loans.
Many lenders can approve a motorhome loan within a day or two after the application is received. Refinancing approval may take several days.
How do I choose a loan that works best for me?
When shopping for a motorhome financing program, certain factors affect which loan will work best for you. Most motorhome lenders require a 20 percent down payment on loans of more than $100,000, 15 percent on loans less than $100,000, and terms ranging from eight to 15 years. Many new motorhomes can be financed with a 20-year term.
One factor to keep in mind is that motorhomes depreciate rapidly in the first few years of use. You do not want to be locked into a loan for a considerable amount of time with an outstanding balance where you owe more than the motor coach is worth.
Also, you may want to inquire about any prepayment penalties if you choose to pay off your loan early. Motorhome buyers historically have low delinquency rates, so many lenders are more open to flexible payment schedules, terms and plans to meet your needs.
Is the interest on my motorhome tax deductible?
There might be a tax advantage for financing your motorhome. For most motorhome buyers, the interest on the loan is deductible as second home mortgage interest. To qualify, the motorhome must be used as security for the loan and must have basic sleeping, toilet and cooking accommodations.
The Internal Revenue Service (IRS) publishes two booklets that contain helpful information regarding tax deductibility of RV loan interest. Copies of “Publication 936-Home Interest Deduction” and “Publication 523 — Selling Your Home” are available online or by calling the IRS at (800) 829-3676.