How to Get Out of an RV Loan: Your Options

An RV loan finances the purchase of a recreational vehicle, such as a motorhome, travel trailer, or camper. Like an auto loan, funds are borrowed and repaid monthly, with the RV typically serving as collateral. Unexpected financial strain, lifestyle changes, or simply no longer using the RV can lead owners to seek options for ending their loan commitment. Understanding these pathways depends on your financial standing and objectives.

Assessing Your RV Loan and Value

Before exploring solutions, understand your RV’s financial position. Contact your lender for a precise payoff amount, which includes accrued interest and is typically valid for about 10 days. Also, gather details on your current interest rate, remaining loan term, and any prepayment penalties.

Next, determine your RV’s current market value. Resources like J.D. Power’s NADA Guides are common valuation tools, considering year, make, model, condition, mileage, and features. You can also compare prices of similar RVs on online marketplaces like RV Trader.

Comparing the RV’s market value to your loan payoff reveals your equity. If the market value is less than the loan balance, you have negative equity. If it’s more, you have positive equity. This difference dictates which loan exit options are most feasible.

Selling Your RV to Pay Off the Loan

Selling your RV directly eliminates the loan, especially with positive equity. Set a realistic sale price based on market value and your loan payoff. Find buyers through online RV marketplaces, consignment dealers, or private sales. Private sales often yield a higher return than selling to a dealership.

Managing the loan payoff during a sale requires coordination, especially with a lienholder. Since the lender holds the RV’s title until the loan is satisfied, direct title transfer is not possible. For a private sale, the buyer might pay the lender directly, or you may need to pay off the loan first to get a clear title. Some lenders facilitate this by accepting direct payment from the buyer and releasing the lien.

With negative equity, you must pay the difference out of pocket to the lender to clear the title. The lienholder will not release the title until the full loan balance is settled. Dealers often handle the loan payoff directly from sale proceeds. Always get written confirmation from the lender that the loan is paid off and the lien released.

Restructuring Your RV Loan

If selling isn’t an option or you want to keep the RV, restructuring your loan can offer financial relief. Refinancing involves a new loan to pay off the old one, aiming for better terms like a lower interest rate. This can reduce monthly payments or the total interest paid over the loan’s life. Apply to various lenders, including banks, credit unions, or specialized RV financing companies; a credit check is required. A higher credit score improves your chances for better rates and terms.

A loan modification involves negotiating with your current lender to change existing loan terms. Unlike refinancing, you don’t get a new loan with a new lender. Modifications are for financial hardship and may adjust payments, lower interest, or extend the term. Lenders may require documentation to verify your hardship. Both refinancing and loan modification aim to make your monthly payments more manageable, but refinancing often requires a stronger credit profile.

Ending the Loan Through Extreme Measures

When other options are exhausted, certain extreme measures can end an RV loan, though they carry significant consequences. Voluntary repossession, or voluntary surrender, involves returning the RV to the lender. The financial repercussions are largely similar to involuntary repossession.

The lender will sell the RV, typically at auction, to recover some of the outstanding debt. You will likely remain responsible for a “deficiency balance,” which is the difference between the amount owed on the loan and the price the RV sells for at auction, plus any associated fees like towing and storage. Voluntary repossession severely damages your credit score, remaining on your credit report for up to seven years, and can make it difficult to obtain future loans or credit at favorable rates.

Bankruptcy is another drastic measure that can affect an RV loan. Filing for Chapter 7 bankruptcy can potentially discharge the debt, but it may also result in the liquidation of assets, including the RV, especially if it is considered a luxury item or has significant equity. Chapter 13 bankruptcy allows for a repayment plan over three to five years, potentially enabling you to keep the RV while restructuring the debt and even lowering the interest rate on secured loans. However, bankruptcy is a serious legal process with long-term credit implications, remaining on your report for up to 10 years, and should only be considered after consulting with qualified legal counsel.