What are typical caravan loan terms?
Caravans let you choose your own adventure, giving you the freedom to explore Australia’s great outdoors the way you want. But arranging finance to buy a caravan or motorhome can feel like another story altogether, especially if it’s your first time.
It can feel like there are many hoops to jump through, including:
- Figuring out how much you can afford to borrow
- Comparing all the loan options available on the market
- Making sense of different lenders’ eligibility criteria
During this process, you have to get your head around all the terms and conditions that are attached to different caravan loan products.
So you’re probably wondering what typical caravan loan terms look like.
Unfortunately, there isn’t a straight answer, as every caravan loan is slightly different.
Why every caravan loan is different
The reason why every loan differs comes down to how caravan finance works. When you make your application, the lender wants to know how likely it is they’ll get their money back.
To do that, the lender looks at a range of factors including:
- Your financial circumstances
- Your employment status
- Your credit history
- The amount you want to borrow
- The size of your deposit
- The length of the loan (the loan’s term)
- Whether the loan is secured or unsecured
- The age of the caravan or motorhome
To further complicate matters, each lender has its own appetite for risk. So while one lender might be happy to give the nod to your application and give you a competitive rate, another might not be as keen.
What is a typical interest rate on a caravan loan?
Lenders use the factors above to help them determine the interest rate of the loan. So there isn’t a ‘typical’ rate. However, there are some general rules such as:
- The better your credit score, the lower the rate
- The shorter the loan term, the lower the rate
- The newer the caravan, the lower the rate
Secured caravan loans also attract lower rates than unsecured caravan loans. That’s because the lender can sell the caravan and recoup some of its money should you end up defaulting on your repayments.
Interest rates can also be fixed or variable. If you choose a fixed-rate loan, the interest rate stays the same over the life of the loan. As a result, so do your monthly repayments – which can help with budgeting. In contrast, variable rates can move up or down depending on market forces. This means you could save money if the interest rate goes down. On the other hand, if the rate goes up – so do your repayments.
Variable-rate loans also tend to come with more features than fixed versions, such as redraw facilities and early repayment options. Depending on your circumstances, these features can save you money over the life of the loan.
What is the best caravan loan?
A frequent question we get asked is: ‘What is the best caravan loan?’ But the best loan for you might not necessarily be the one with the lowest rate. Rather, it needs to suit your financial circumstances and goals – whether that’s the flexibility to pay off the loan early or repayments that don’t put a large hole in your monthly budget.
That’s why you should work with an expert caravan loan broker like National Loans. We do all the hard work in identifying a loan that matches your needs. Then, we’ll get you a great rate from our panel of over 30 specialist banks and non-bank lenders.