Financing Q's

poppin_fresh wrote:
It's interesting you mention a down payment.

I ran the scenario of borrowing $25k (to get a 10 year term) and putting a $2500 down payment to reduce the loan amount to the loan officer at the CU.

He said that the down payment does not reduce the amount borrowed. I would still have the same payment, based on borrowing $25k but a lump payment would immediately be made towards the principal.

That is great in that it reduces the back end of the loan, but that is not how I thought they worked...

That ISN’T how it works.

A down payment goes to the place you are PURCHASING FROM (IE the dealer), not the loan company.

Example, you want to buy a item that costs $25K, you give the dealer $2,500 cash as a down payment.

That means you would need to “borrow” $22,500 from the loan company instead of the full $25K. Makes a difference.

You get a check from the loan company for $22,500 and YOU "supply" the $2,500 in cash or check from your own money.

That is how I buy vehicles, I negotiate a sale price, then I pay a portion of the sale price from my own account and the bank loan covers the rest..

Example.

I negotiate a vehicle sale price of $44K out the door including taxes, title, plates.. I get a loan for $34K from a bank, I then write a check from my own account for $10K to cover what the bank loan does not.

I think what the Credit Union is talking about is if you applied $2,500 as a payment towards the loan after you have borrowed $25K.

That is a smart way to reduce the overall interest owed to the loan company and shorten the time you will pay back the loan.. But in your case not the angle you need at this time.

Down payments are useful in times where you may not qualify for a specific loan.

For instance when I purchased my home I qualified for a 30 yr mortgage with 10% down payment but I was not qualified for a 15yr mortgage that I wanted unless I put 20% or more down on the house as a down payment (which is what I did).

A down payment is nothing more than a small prepayment by the purchaser to the seller.

AFTER you have purchased the item you also can make additional payments to the loan company towards the principle amount you borrowed to help pay down the loan if you want. It is optional and is a great way to save some money in the long run of the loan.

poppin_fresh wrote:
Hi all,


I realize I could finance through the dealer, but I understand most dealers mark up the rate as their commission.

Absolutely a good idea to shop around for financing, and maybe in places you wouldn't think of. We financed our first RV (used fifth wheel) through our State Farm Insurance agent at the time (State Farm Bank) at a lower interest rate than we could get for an identical term loan from a big name bank. Don't dismiss dealer financing either, though. Went the dealer route when we purchased our new TT in 2012. Their financing (through Bank of America Specialty Vehicles) was lower than the rate we got from our bank or credit union. And as you discovered, credit unions often want a significant down payment and grant loans for a much shorter term than commercial banks.

poppin_fresh wrote:
I talked to the CU today.

The rate is good, but because the trailer I want is only (yeah "only") ~$22K the max term available is 8 years. The interest is decent, but it makes for a payment I could afford, but would rather not.

I like the flexibility of a lower payment as I can always pay more towards the loan, but I can NEVER pay less....

Back to the hunt I go.

Bet if you went through the dealer you could get the 15 years. Also FYI interest for a RV is a write off as a second or primary home.

Check around for the best rates. 18 months ago when I bought my Tundra pickup I called up my credit union that I have used for years and got a 2 3/4 rate. I told the dealer that I would take care of the financing thru my Credit Unions and he asked me what is the rate. I told him 2 3/4 percent and he asked if 2 1/4 percent would be better (dumb question as the answer is yes). They worked thru another credit union so I made a token deposit of 5 bucks and went with the lower rate. A person just never knows. I met a few months ago a banker and their rate was even lower (special I think). When I replace my Prius this fall I will check around and see what goes. A couple of calls to to credit unions and banks should give me a good idea.
Maybe if you get a good rate on your own and then the dealer might lower it who knows.
Flagman

mtofell1 wrote:
From my experience in the last few years RV financing is a bad deal compared to other money. And by other money I mean home equity lines of credit or just moving money around between teaser rates on credit cards.

About 3 years ago when I bought my TT I got 6% on about 18K (fwiw my credit is near 800) from my dealer through US Bank. I looked around a bit a year ago and it seems to have gotten a little better but not much. I've made somewhat aggressive payments and just rolled the 10K I owed onto a credit card with 0% interest for 15 months (2% transaction fee).

I'm getting close to just paying it off and might be looking to upgrade. It sounds like RV $$ may be getting even cheaper lately. 2-3% range is pretty nice, especially if you can take advantage of the tax write-off for 2nd home.

same thing I did I went from a $300 payment to a $100 payment at 0 percent on the card, kept making the $300 payment and. Had it paid for in no time. Takes discipline but it worked great for me

Firehawvvk wrote:
I always like to have enough money down and never finance too long of a period. Doing either one or both can put you "upside down" on your purchase and put you in a bad spot if you total it out in an accident or need to sell or trade it in you will owe more than it's worth putting yourself upside down in your loan.

accident? If you aren't buying GAP insurance or equal replacement insurance on a hugely depreciating asset you deserve what you get....

I always get my own financing then the dealer beats it (by cutting into their commission) so I get a lower rate and they get the business.

Can the dealer meet or beat the 2.75 rate? You don't have to let him know what the terms are. Also, I'd put your current TT up for sale on Craigslist - you don't say what your plans are for it, but you will get soaked on a trade in.

I think it all depends on the financial institution. For our mortgage, we send them extra and it goes right to principal. For my truck I send them extra too and it get applied to the back end like you said. For the truck, I think I'm paid up for the next 10 months.

It makes little difference if you're paying it off early but I think going towards principal works out better for you as you pay lower total interest. For shorter loans like cars, IIRC the difference was not much at all

It's interesting you mention a down payment.

I ran the scenario of borrowing $25k (to get a 10 year term) and putting a $2500 down payment to reduce the loan amount to the loan officer at the CU.

He said that the down payment does not reduce the amount borrowed. I would still have the same payment, based on borrowing $25k but a lump payment would immediately be made towards the principal.

That is great in that it reduces the back end of the loan, but that is not how I thought they worked...