Question about RV Financing

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steveandcasey

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Feb 16, 2011
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Hello!  My name is Steve, and I'm about to purchase my very first travel trailer.  After 14 boats, we decided to try the land as well as the water.

My question concerns financing and the "rule of 78".  My dealer will finance my TT at a rate under 5%, and for 15 years.  What troubles me is that he said that every one of their lenders uses the rule of 78.  This means that in the earlier years, I will pay more interest than toward the end of the term.  This is not ideal if you pay the loan off early.

I called the Good Sam club loan department, and the nice gal I talked to told me that all the lenders they deal with do exactly the same, ie; the all use the rule of 78.

I checked with my local bank, where I have accounts and loans, and for an RV loan the will only do 7 years at 9.9%.  That won't work.

So my question is, does anyone know of any lender that offers terms like the dealer can get me, but that do NOT use the rule of 78 to calculate interest payments? 

I sure hate that to be a deal breaker, but don't see where I have many options from what I can tell.

Thanks for helping!

Steve
 
All home mortgages are like that, and the interest payments (a higher percentage at the front end of the loan) are detailed in the Amortization Schedule of the loan documents.  I'm assuming RV loans take on that quality since they are viewed more as a "mortgage" (like a home) than a straight "loan"(like a car).

There is probably no sure way to say what banks always/never put certain terms in their loans.  Every bank out there has a variety of lending options.  It sounds like you should set aside a day, and start calling a list of banks to ask about their loans.

One way to avoid all that (and the method I recommend) is to pay cash.  ;)  Go for a good-condition used TT, and there should be some pretty good buying options out there.  LOTS of used RV's on the market right now.
 
I agree with Scottydl.  It's been my policy,  In God we trust, all others pay cash. 

Take your down payment, and what ever you were planning on a payment, and deposit it in a savings account.  Make your monthly payment until you have the cash to buy a good used unit.  Then, if you really enjoy the unit, but think you're going to want to upgrade in the future, continue to make those monthly payments to yourself until you have enough to buy your upgraded unit outright.

 
Never heard of the Rule of 78 for auto or RV financing. Our RV loan from Wells Fargo is a straight x% for x years, calculated just like any auto loan. FWIW, I found noted on several websites that the use of the Rule of 78s is prohibited for consumer loans having a term exceeding 61 months, per USC. So if you're looking at a 15 year loan, the Rule of 78s shouldn't apply.
 

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