Here we are doing two different case studies for twifo different couples who both bought brand-new motorhomes. In the first case study we are talking about a young couple in their early thirties, and in the second case study we have a couple who are retired and in their mid-sixties. For RV loans the principal amount was $85,000 USD, and that is where the similarities stop.
Our first couple bought their RV for touring the country during their summer months because they were both school teachers. They bought a motorhome quite early in life if you compare it to most RV owners, so they got their RV financed for of 25 year term. So now we can do the math on their case study taking into account an $85,000 principal, a 7.2% interest rate, a 25 year term, and making payments every 14 days (biweekly). Here is the math;
#1 RV Loan Calculation Results:
Total Amount to be payed: $161,617.40
Total amount of interest $76,617.40
Payments: $247.96 every two weeks
For the second case study; Carl and Betty were both 60 years old when they decided to buy an RV, but they didn't actually take order of their new coach until they were 64 years old.
In their case the principal amount was also $85,000. However, in Carl's and Betty's case they were taking the loan for five years and making payments every 14 days. So we can do the math on their example;
#2 RV Loan Calculation Results:
Total Amount to be payed: $100,417.58
Total amount of interest $15,417.58
Payments: $770.33
As you can see, there is a drastic difference in amount of interest paid between these two different case studies. In Carl's and Betty's example they only had a five-year term which cut down their interest substantially and this is the way to go if you can. However, this is not the typical kind of RV financing we find out there - people generally have to buy their motorhome over at least a 15 to 25 year term.
It's always advantageous to borrow money for a shorter term and not a longer term for obvious reasons which are demonstrated above, but there are other factors that can save you money as well. One of these factors is the length of time between payments. You can pay biweekly, weekly, or monthly in almost all cases of personal financing.
As well as the length between payments, you want to make sure you don't get wrapped up in a compounding interest loan, or a balloon payment loan, which some lenders will try to encourage you to take out. These are very costly and with a compounding interest rate you could be paying for you're motorhome 4 times!
Usually you don't get asked to sign a compounding interest rate loan when you buy an RV but since some people are able to write off their RV payments as their primary residency for tax purposes they can wind up paying a compounding interest rate - must be avoided folks.
About the Author:
Terry Zulit is a professional writer and blogger who writes about various products and services. You can read more about
RV loans here.
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510
Date Published :
Feb 20 2009