Whether you’re a grey nomad or just a keen adventurer, there’s millions of kilometres of Australian roads to explore, so here are five things you should know about financing a caravan.
Depending on options and how you fit-out the caravan, even relatively modest caravans can sell for more than $70,000, while elaborate models can sell for $150,000 or so. It’s safe to assume not many people have that amount of money sitting in the bank they can splash on a caravan or camper - especially because they are often bought to save money on hotels!
However, the yearning to explore this great country with your accommodation in tow can be great. So, your next option other than cash is to finance your caravan or camper purchase through a loan. So, what should you consider before signing on the dotted line?
Five Things to Know About Caravan & Camper Loans
There’s a few things you should know about caravan and camper loans, but the good part is the finance process is often similar to securing a car loan.
5. Interest rates
Like any automotive loans, there’s a bevy of products and interest rates to choose from. Caravan loans can start anywhere from the low-3% to upwards of 10%, depending on the lender, how you’ve configured the loan, and your credit history (more on that later).
An important factor in the interest rate is if the loan is secured or unsecured. Secured loans tie the loan to the asset, in this case a caravan. This means if you default on payments, your lender has recourse to take your caravan away.
The benefit of a secured loan is that you’ll likely get a lower interest rate. Unsecured loans do not tie the loan to the asset, at the expense of a higher interest rate.
4. Loan terms and lengths
Again, similar to car loans, caravan loan terms can be anywhere from a couple years to around seven years. While you’ll face higher monthly payments on a shorter term, you’ll ultimately pay less interest. Many borrowers like to pay the most they can while still fitting the repayments comfortably into their weekly, fortnightly or monthly budget.
In terms of terms, borrowers can often choose between a fixed and variable rate. Fixed loans provide repayment certainty, while variable loans can ebb and flow with what the market is doing - which could be either up or down, which affects your interest rate.
One benefit of variable loans is that they likely offer more flexible payment options, while fixed loans could be more restrictive in this regard. As always check with your lender.
3. Be mindful of options and extras
Listed caravan prices often consider only the bare essentials. Caravans have many optional accessories able to fitted, arguably more so than cars.
Everything from the bedding area, plumbing, sinks, ovens, showers, toilets, furniture and more can be options. This adds thousands of dollars to the bottom line, so make sure to account for these ‘accessories’ when it comes time to apply for a loan.
2. What about bad credit?
If your credit history isn’t the best, then you don’t necessarily miss out on the opportunity to get finance for your caravan or camper.
To improve your credit report you can start by paying off existing loans on time, including credit cards, personal loans and more - even your phone bill and electricity bill can help. Carloans.com.au works with its suite of up to 30 lenders to find an interest rate that works for you.
1 . In-house vs external finance
You may have noticed when having a browse around for your next caravan purchase that the caravan dealer or brand offers in-house finance, similar to a car dealership. However, make sure to double check the interest rate and loan terms.
It’s not uncommon for the loan product to be a white-labelled product from an external lender. While convenient, these types of loans can attract a steeper interest rate.
They may also have more restrictive repayment terms. The dealer or caravan manufacturer then takes a portion of the loan interest, which is another money-making avenue from them.
By going external, you’re able to shop around and find the best rate and loan for you.
If you’re shopping around for your next caravan or camper, speak with a carloans.com.au loan specialist today to find a suitable finance option for you.