Is it possible to finance a $23K trailer for 180 months?

[SlothHorn]

I've noticed that my credit union only extends out to 8 years or so. I just clicked on the GoodSam financing table. The max for a $23K trailer is 12 years @ 8.49%.

Note: We have near-perfect credit and can put $ down if that makes a difference.

I understand that financing works differently with an RV due to its designation as a luxury item; however, it's surprising that I'm not seeing any options.

[ferndaleflyer]

Had one friend buy a DP financed for 15 or 20 years (forget which) payment $1500 a month. Another friend purchased the exact same unit repoed at auction for $48,000 cash, no payments. I sure would hate to be paying $1500 a month on a 15 yr old unit. Mine cost $234,000 new and is now worth maybe $35,000 but I paid cash for it 20 years ago and its old but good as new, I am old to!

[TomG2]

Gdetrailer wrote:

While I have mentioned that, I have run into a pretty persistent bunch of folks here that always continually point out that there is no need to specifically state how the extra money is to be applied. They insist it is done automatically (which is not always the case, but you can't argue with them).

You can get an argument on here about the color of mustard. I threw a few extra dollars at an installment loan and discovered that the principal did not go down but that my next payment was not due until next April. Since then, I stipulate "Principal" for any non scheduled payments. The only reason I asked is that DownTheAvenue made it sound "Tricky".

[Gdetrailer]

wanderingbob wrote:
As stated above , making extra payments is wrong , you make a payment and also enclose a check and a note stating you are making a " payment on the principal " also .

While I have mentioned that, I have run into a pretty persistent bunch of folks here that always continually point out that there is no need to specifically state how the extra money is to be applied. They insist it is done automatically (which is not always the case, but you can't argue with them).

I cannot figure out what harm it causes to specifically indicate how it is to be applied and in reality it takes but a second and a slight amount of ink from a pen to mark it as such.

Years ago when banks used payment books they ALWAYS had a line which allowed you to fill in the extra amount and how it was to be applied..

Banks are not mind readers and typically the DEFAULT is to apply any extra funds as a extra P&I payment.

Remember a loan IS a binding legal contract..

[TomG2]

wanderingbob wrote:
As stated above , making extra payments is wrong , you make a payment and also enclose a check and a note stating you are making a " payment on the principal " also .

I don't write checks or send notes to my bank. My online bank has a place to categorize payments, "Regular payment", "Principal payment" etc. I asked a simple question. I thought. Notes and checks get lost in the mail. Haven't you heard?

DownTheAvenue made it sound like it might be more complicated than that.

[wanderingbob]

As stated above , making extra payments is wrong , you make a payment and also enclose a check and a note stating you are making a " payment on the principal " also .

[TomG2]

DownTheAvenue wrote:
....snip....
Check your contract with the bank regarding early pay offs, and discuss with the bank how to handle extra payments. Without care on your part, those extra payments will be applied to future monthly due payments, and although you pay the loan off early, you will pay all the interest as if you paid for the whole term. Sometimes it is just better to make the minimum monthly payment and save up extra money to make a one time large payment to pay off the loan. You can cost yourself many thousands of dollars if you don't do this right.

Is "doing it right" as simple as designating extra payments as "principle" payments?

[Gdetrailer]

RobWNY wrote:

You have to make sure you have enough other deductions to itemize. The standard deduction is so much now, most people can't. If you're discussing a 15 year note for 23K you likely are in the standard deduction category and wouldn't be able to write off a 2nd mortgage for an RV

Correct, which is why in MOST cases there is zero "benefit" as far as using a RV as a "second home" tax deduction, especially so in the case of a $23K RV loan.

People here seem to fall over themselves trying to qualify their RV for that deduction and generally unless you have a lot of qualified deductions to itemize your not going to get more than the standard deduction.. In other words, do not buy a RV with the sole idea that you can make out better on taxes because it may not work out that way.

In reality, you really get more bang for your buck by paying off your RV loan at a faster rate by making extra payments. The savings in interest will by far be more than any "tax savings".

[RobWNY]

Gdetrailer wrote:

elwood58 wrote:
Whatever you decide, if you are not already writing off a second home, the RV interest is deductible so long as it has a galley and bathroom.

Meh.

In reality, the interest deduction on a $23K loan for 12 yrs is peanuts.

You are talking a mere $1,083.33 reduction in your tax liability per yr average ($13K interest paid for the life of the loan) keeping in mind I have simplified it for explanation.

What does that mean to you?

if you have say $50K of income it reduces it by $1K or now your income looks like $49K..

You might overall see a few dollars less in your taxes once you run all the numbers.

Not going to even see that blip on the radar.

Now a $100K-$200K motorhome, you most likely will see some tax benefits but that isn't the reason you bought it.

Keeping in mind I have simplified things to illustrate, in reality the first 2/3 of the loan you are paying more interest on the loan than you are paying down the Principle (what you borrowed). So the first 2/3 of the loan you could see some tax liability reduction and the last 1/3 you will see nearly nothing.

Amortization calculators are your friend and will show just how much interest you will pay each month and how much you will pay towards the Principle borrowed per month.

You have to make sure you have enough other deductions to itemize. The standard deduction is so much now, most people can't. If you're discussing a 15 year note for 23K you likely are in the standard deduction category and wouldn't be able to write off a 2nd mortgage for an RV

[time2roll]

thomasmnile wrote:
Had a 15 year loan (dealer finance through Bank of America Specialty Vehicles), 4.99 simple interest. Paid it off in 7 years, didn't have to make arrangements, seek permission or anything. The additional payment each month was applied to principal,the scheduled payment had the interest taken out of it. Final payment I made was the payoff balance I obtained from B of A, and just like a car loan that figure was good for 10 days. Everything ended happily ever after.

+1 Just not a big deal really.

[thomasmnile]

Had a 15 year loan (dealer finance through Bank of America Specialty Vehicles), 4.99 simple interest. Paid it off in 7 years, didn't have to make arrangements, seek permission or anything. The additional payment each month was applied to principal,the scheduled payment had the interest taken out of it. Final payment I made was the payoff balance I obtained from B of A, and just like a car loan that figure was good for 10 days. Everything ended happily ever after.

Edit: OP, you're more likely to get an long term note via dealer financing than a retail bank or credit union. That was our experience; our credit union doesn't finance longer than 96 months on any RV, and only financed 75 % of the purchase price. Our experience was in 2012, things have changed, and it's entirely possible longer term financing is more depending on credit score.

[Grit_dog]

SlothHorn wrote:
I've noticed that my credit union only extends out to 8 years or so. I just clicked on the GoodSam financing table. The max for a $23K trailer is 12 years @ 8.49%.

Note: We have near-perfect credit and can put $ down if that makes a difference.

I understand that financing works differently with an RV due to its designation as a luxury item; however, it's surprising that I'm not seeing any options.

Regardless of your “personal” not “financial” reason for wanting to do this, you absolutely don’t understand finances and financing if this even appears to be a remotely acceptable option.
Sorry I couldn’t answer your question though.

[Gdetrailer]

DownTheAvenue wrote:

Raife wrote:
We just purchased our travel trailer and got a much better rate than that. We shopped around for a couple lenders, got preapproved through our bank and the dealer was able to get a another .25% off. We financed for 144 months to get the interest rate (longer term = lower rate), put a sizable down payment, and will be sending in almost double the scheduled payment amount. We will end up paying the loan off in ~5 years as opposed to 12 years.

Check your contract with the bank regarding early pay offs, and discuss with the bank how to handle extra payments. Without care on your part, those extra payments will be applied to future monthly due payments, and although you pay the loan off early, you will pay all the interest as if you paid for the whole term. Sometimes it is just better to make the minimum monthly payment and save up extra money to make a one time large payment to pay off the loan. You can cost yourself many thousands of dollars if you don't do this right.

It is always good to know the exact terms of the loan is before signing, however MOST Interest loans will be OPEN ENDED term loans and will allow for early payoff with no penalties. This type of loan you should always clearly specify how the extra money is to be applied. Failure to specify most banks will simply apply the money the same as making a normal payment towards P&I.

If you specify the extra money is to be applied to the PRINCIPLE ONLY you will now reduce the principle at a much faster pace than allowing it to be applied to P&I.

The loans which are gotcha loans are the ones that entice you in with ZERO PERCENT rates.. Those almost always are CLOSED ENDED loans and paying off early will not save you anything other than dumping the monthly payments early. The Interest is simply hidden inside the loan and they just split the payments in to monthly payments.

[Gdetrailer]

elwood58 wrote:
Whatever you decide, if you are not already writing off a second home, the RV interest is deductible so long as it has a galley and bathroom.

Meh.

In reality, the interest deduction on a $23K loan for 12 yrs is peanuts.

You are talking a mere $1,083.33 reduction in your tax liability per yr average ($13K interest paid for the life of the loan) keeping in mind I have simplified it for explanation.

What does that mean to you?

if you have say $50K of income it reduces it by $1K or now your income looks like $49K..

You might overall see a few dollars less in your taxes once you run all the numbers.

Not going to even see that blip on the radar.

Now a $100K-$200K motorhome, you most likely will see some tax benefits but that isn't the reason you bought it.

Keeping in mind I have simplified things to illustrate, in reality the first 2/3 of the loan you are paying more interest on the loan than you are paying down the Principle (what you borrowed). So the first 2/3 of the loan you could see some tax liability reduction and the last 1/3 you will see nearly nothing.

Amortization calculators are your friend and will show just how much interest you will pay each month and how much you will pay towards the Principle borrowed per month.

[wapiticountry]

Gdetrailer wrote:

wapiticountry wrote:
Small loans are likely to viewed more as a nuisance than an opportunity. It costs the lender the same amount of money to process a $20,000 loan as it does a $200,000 one. Therefore the actual costs of $20,000 loans are ten times higher than $200,000 ones from the lender's point of view. If I was underwriting an RV loan, I would be very concerned that someone wanted to get a 15 year loan on such a low balance. It would raise a red flag that the borrower had cash flow issues.

Not really.

Take into consideration that banks use the property that you are buying as collateral. Collateral assures the bank that if you default on the loan that they WILL take ownership of the property and resale it to get the loan paid.

Homes on average gain value over time provided you do upkeep.

RVs even with up keep lose value over time, banks are less interested in a asset which loses value..

They are taking chances with RVs and the longer the note, the better chance that if you default they are stuck with a unwanted RV that they will have a difficult time reselling and most likely result in loss of banks money..

Short loan terms under 12yrs on depreciating assets banks will not bat an eye at.

I was in banking for many years, most of it in at the executive level in consumer lending. I don't think it would even take all the fingers on one hand to count all the repossessions where we broke even. On top of that, a little known provision in the law requires the lender to return to the borrower any proceeds of a repossession sale that exceeds the balance on the loan. So even if you have paid your Newell down to a $25.00 balance when we repossess it and then we sell it for $500,000 we had to write you a check for the difference, less fees and that pesky $25.00 balance. On top of that, we had to document how we arrived at that sale figure, which is why almost all repossessions are sold at auction. That way no borrower could claim we gave a sweetheart deal to an insider.
We also always paid close attention to terms. The longer the loan term, the greater the scrutiny. Our internal scoring system reflected that and we would often grant a conditional approval based on a term shorter than the term requested. Anything that moves is basically lousy collateral. The collateral value of an automobile is heavily weighted towards the transportation and ego values. People need their cars to get around and they don't want their friends to know their car was repossessed, which is easy for those neighbors to conclude when one day a Lexus is in the driveway and the next day they are driving a Pinto. With luxury items, not so much. You don't need an RV to get to the liquor store and you can tell your neighbors you just got tired of RVing. Hence, RVs are greater risks, so the bank needs higher interest to offset that risk.

[Raife]

DownTheAvenue wrote:

Raife wrote:
We just purchased our travel trailer and got a much better rate than that. We shopped around for a couple lenders, got preapproved through our bank and the dealer was able to get a another .25% off. We financed for 144 months to get the interest rate (longer term = lower rate), put a sizable down payment, and will be sending in almost double the scheduled payment amount. We will end up paying the loan off in ~5 years as opposed to 12 years.

Check your contract with the bank regarding early pay offs, and discuss with the bank how to handle extra payments. Without care on your part, those extra payments will be applied to future monthly due payments, and although you pay the loan off early, you will pay all the interest as if you paid for the whole term. Sometimes it is just better to make the minimum monthly payment and save up extra money to make a one time large payment to pay off the loan. You can cost yourself many thousands of dollars if you don't do this right.

Good advice...I will clarify with the lender. Thank you.