Motorhomes are a physical representation of the common phrase, “home away from home.” They provide you the combined opportunity of hitting the road on an adventure and the pleasure of not having to leave the comfort of your crib or your family.
Before you approach the banks, brokers, or dealers for a loan to finance your motor home purchase, here are a few pieces of information you would find handy:
- Your loan financing options
You can’t leverage the advantages that you are not even aware of. You could obtain loans through credit unions or apply for loans at commercial banks.
You could also avoid the entire arduous process and approach My Financing USA and they will take care of everything, from loan negotiation with the banks to the underwriting stage. There’s also the home equity loan option, staking your home as collateral for your motor home.
- Financing terms on motorhome loans
Typically, you have two options to choose from when it comes to motorhome financing terms. Apply for a loan with a longer-term, which allows you to pay back your debts in small, manageable bits, or opt for a shorter term with a higher monthly payment amount.
Paying a little higher than your stipulated monthly amount on your long-term loan can influence a reduction in your interest rate and even shorten your loan term. And isn’t that the wish of every borrower? Loan terms vary from anywhere between 10 to 20 years.
- Difference between interest rates and APR
It is important to know the difference between the two to understand lenders’ terms and make a thoughtful decision.
Interest rates refer to the amount the lender charges you for borrowing a certain amount, the principal (e.g. $10,000), represented as a percentage of that principal amount (5%).
The APR, on the other hand, consists of the principal amount ($10,000), plus the lender’s processing charges ($500). The new amount ($10,500) is divided by the initial interest rate (5%), and the result ($525) is multiplied by 12 to give the annual payment amount ($6,300).
The new annual payment ($6,300), is then divided by the original principal amount ($10,000), to get the APR (6.3%). The APR is usually higher than or equal to the interest rate.
- Your credit rating
Request your credit score from your credit company and make sure your credit history is correct in their records before applying for loans from financial institutions. Knowing your credit score (especially when you have a good score) gives you an advantage in negotiating better financing terms.
- Pitfalls to avoid
Never shop for your motor home before shopping for a loan. It is best to know what amount you are qualified to borrow so that this can guide you in making your choice at the motor home dealers’. Also, do not shop for loans in haste.
Approach different lenders and compare their financial terms so that you can make an informed decision. Also, never feel embarrassed about negotiating your loaner’s interest rates.
Once your motorhome loan is underwritten, there is no going back, and you will be stuck with the result of your poor negotiation for years.