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What You Need to Know About RV Loans
RV loans are just a special loans that you can choose to finance your RV with. In principle they are exactly like any other loan, so it may be a good idea to follow up on some financial terms. So what this loan different from the rest? It's simply that you can only use the loan for a specific financing need. If you go to a bank you can apply for a $10.000 loan and spend it all on sweets and going to concerts. If you apply for an RV loan you can only buy an RV with it.
Let's get to grips with some financial terms first, we really only need to know two, APR and the difference between variable and fixed interest. Usually for specialized loans the most important thing that everyone looks at is the APR. the average percentage rate is the cost of your loan, the extra that you pay on top of the monthly installments. If you take out a $10.000 at 5% APR, for 10 years it means that you would have to pay $1000 each year if you would only have to pay back the loan. The APR is a percentage you pay extra every year, so instead of $100 yearly, you pay $150 the first year ($50 is 5% of $1000), $50 is the cost of taking out the loan for the first year. If you want to be thorough, you can calculate your total costs by calculating APR for each year. Be careful though, that each your debt amount is getting smaller. In the first year we paid $50 extra, but in the second year this will only be $45, because we only have $900 left to pay back.
Why Get a Specialized Loan?
The simple reason behind it is that you can usually get better terms. If you take out a loan from a bank you can spend it on anything, you may throw it in the air and let the wind blow it away, you could buy a million gallons of water and pour it into the sea, whatever you want. If you take out a specialized loan it is obvious you got something of value, and that is important to the bank issuing the loan. The eligibility criteria may also be lower, this of course depends on who you're doing business with.
What to Look Out For
As with any loan, try and get a fixed interest rate. What happens is, if you get a loan, say at a 8% interest, the interest is calculated daily. If interest rates rise, your rates will also rise in conjunction. If you get a fixed interest rate then you can be sure that you will pay 8% whatever happens. Some loans offer interest rate locks, which you can apply for.If eligible, you can rely on the 8% every month, so you have a very calculated cash flow. If you are into finance news you may choose variable rates if you think that interest rates will be going down. In this case you will have to pay lower interest. It may be worth the risk because you can lock interest rates any time with some companies.
It is important with RV loans that you go to a reliable company. There are so many sites on the internet that I just couldn't trust looking at their web page. A cool looking web page can still be a fraud, but it is less likely. Check if the company is listed and so on, be sure to go to reliable people for loans.