Red Clay

All about Caravan Finance

If you are planning to get a caravan, one of the challenges you will face is the funding to cover such investment. Caravans are homes on wheels, and they don’t come cheap at all. Even the smallest caravans cost tens of thousands, and usually, it is not something you can shell out cash for without second thought. But you can get your caravan through caravan finance. If you have any dream of exploring Australia at your own pace, you can definitely achieve that dream.

Types of caravan finance

There are several types of caravan finance, all of which operates differently to help you achieve the same goal – get a caravan. The form of caravan finance that you go with will usually be dependent on several personal factors, but this article discusses the common types of caravan finance.

Caravan Loans

This is no doubt the most popular form of caravan finance. In fact, it is what most people think of when they hear of caravan finance. In this type of caravan finance, the lender simply gives the borrowers the money they need to buy the RV, and it is the borrower that buys the caravan themselves. Most times, caravan loans could be the whole amount of money needed to buy the caravan, or it could just be a substantial part.

Several lenders offer this form of caravan finance, and a borrower doesn’t have to look too far to find a lender that will give them the perfect caravan loan. Caravan loans also come in a variety. It is either a secured loan or an unsecured loan. A secured caravan loan is one that comes with security as an important condition for getting the loan. This means you have to present collateral, a property of yours that is equivalent in value to the loan you are seeking. In the case of a default, the lender will take possession of the property you have used as collateral. On the other hand, an unsecured loan is one where all you have to do is present all the necessary documents for the loan, and the lender does not ask you for collateral before giving you the loan.

Each of these has its own pros and cons. A secured caravan loan is not available for someone who doesn’t have the substantial property needed as collateral, but it usually comes with less strict terms and lowers interest rates. For the secured caravan loan, your credit rating doesn’t even have to be exceptional because the lender has your property if you default. An unsecured caravan loan, on the other hand, is much trickier as the terms could be stringent. The lender might also make sure they are not available to people with bad credit rating, and the interest rate is usually higher, but you don’t need a property to access it.

Hire Purchase

This form of caravan finance is something you will usually get from the dealership, but there are lenders who also specialise in doing it. With this form of finance, the lender owns the vehicle and gives it to you on lease. You are then expected to pay a stipulated amount monthly which is spread to cover the lease and the cost of buying the caravan. The borrower has an obligation to buy the caravan under this agreement, and once you complete the terms of the agreement, the caravan becomes yours. Before then, you will only be in possession without ownership, but once you complete the payment, the caravan’s ownership transfers to you.

Lease

This is simply hiring a caravan for your use. It is perfect if you don’t need the caravan for permanent use. Also, if you prefer to use the latest caravans models, a lease will work for you. With this, you are essentially paying for the period during which you are using the car, and in most cases, it rarely exceeds a few years. It is not the same thing as a hire purchase because you are not under any obligation to buy. But there are some leases that give you the option to buy if you wish to.

Chattel Mortgage

This finance is specifically for businesses, so if you are trying to get a caravan for your business, you should consider this. It is secured except that you are not exactly using your own property. The caravan itself is used as collateral for the finance, which means you might lose the caravan if you default on the agreement.

What to consider when getting caravan finance

Interest Rate

The interest rate on the caravan you are getting is worth considering. In fact, it should be the first thing you look at because it determines the cost of the loan. Low interest is always preferable, but you should make sure that there are no hidden charges attached, which could increase the interest rate. It is always better to have a fixed interest rate, as this makes it convenient for you to calculate how much you are paying.

Repayment Schedule

It is always necessary that you pay serious attention to this because it works with the interest rate to determine how much you will pay. For example, if the interest rate is low, but the repayment duration is long, you might end up paying way more than someone with a higher interest rate with a shorter repayment schedule. Thus, the secret is to make sure that the duration of your caravan finance doesn’t exceed the time it will take you to repay the loan. For instance, if you can comfortably repay the loan in two years, there is absolutely no reason for you to exceed the loan duration because that will mean paying interest on the loan for that period. Thus, achieving a balance between the repayments and how it affects your financial stability can help you a great deal. A good way to do this is by using a finance calculator.