What you Need to Know Before Securing a Caravan Loan

A caravan is a must-have for many Australian families. Whether you’re purchasing a second home or want additional living space – a caravan can provide the perfect solution. If you’re looking to compare all of your finance options in one place, you can get a caravan loan with Driva.

Before you head out to secure your purchase, here are a few things that you need to know about loans and interest rates.

What are the benefits of securing a loan?

Unlike Australia’s astonishingly high property prices, caravans are relatively cheap. However, if you have to pay cash for your caravan, it might take years before you own it in full. Securing a loan can speed up the process, allowing you to enjoy your new purchase sooner. It also opens up other possibilities, such as investing in a caravan and renting it out to cover your repayments.

What types of loans are available?

Most people rely on personal loans or car loans to purchase caravans. Although it might be possible to secure a home loan for this purpose, you will most likely end up paying more interest than with a personal loan.

Instead of borrowing from a bank, you can also approach a caravan dealer to negotiate the price and secure your purchase on the spot. Although this might be useful for those who want to pay cash, most people will require a personal or car loan instead.

Caravans are a type of asset, meaning they can be used as collateral when applying for a loan. As soon as you’re approved for a personal loan or car loan, the bank will set up an automatic payment schedule and you will start repaying your loan as soon as possible.

What type of interest rate should I expect?

Caravan loans come with interest rates that are similar to car loans. Banks and other financial institutions might advertise lower interest rates, but the actual rate you qualify for will depend on your credit score and history. The higher your credit score is, the lower interest rates you’ll normally be able to access.

What if I have bad credit? Are there any options available to me?

Caravans might be a cheap long-term investment, but if you have bad credit you might find it difficult to secure a loan. If this is the case, try approaching your local bank or credit union first. You can also contact a non-profit debt advice service for advice on how to improve your chances of securing a loan. If you still can’t secure a loan, try asking family members if they are willing to act as co-signatories. If your family members have clean credit records and own their own homes, the bank will see them as a good risk and might give you a better interest rate.

Potential drawbacks of a caravan loan

Caravans depreciate rapidly, meaning that it might be difficult to sell the caravan later on. If you’re purchasing a caravan on a loan, make sure that you can afford the repayments until you decide on selling it. This means taking into account the time period and interest rate when calculating how much your repayments will cost. In some cases, you might end up paying more for your caravan than the amount that it’s actually worth!

A final word

Rather than buying a caravan on impulse and paying later with high-interest rates, make sure you do your research first. Decide on why you need a caravan and purchase one only once you can afford the repayments. This will ensure that you don’t end up with a loan that you can’t pay back!