Financing Interest Rate - seems high?

[gertpacu]

Originally Posted by dixonge

Working with a consignment dealer in TX. Financing of $17K approved through Medallion Bank - 120 months at 9.98%

My credit score is 806.

I realize there are limits for full-timers, but this still seems high. There are no pre-payment penalties, and we plan to pay it off early, but would you accept this deal with this interest rate?

RUN AWAY!! That is crap! I never had credit until I was about 33 (7 years ago) and even with a car loan paid off, and another almost paid off, and two credit cards paid off I am at 765. Main reason is my credit history. But I got a better APR for my car. 3.5%. My 5th wheel I paid cash so I couldn't tell you. 10 years though and 120 payments for only 17k? You will end up paying a lot of interest if it's out to 120 months.

[gertpacu]

Maybe they are doing this high rate because of the % that people default on RV loans? I know they are almost impossible to find if they want to repo one, and have to go through an eviction process if you're living in it (to which you move somewhere else and wish them luck locating you again). The tactics other than calling are checking POBox locations and looking for close RV parks. Otherwise they are almost impossible to find when used as full time living.

[dixonge]

Also this is for low-end used RV, not nice new fancy one. Plus we don't have a mortgage, rent, or own a home. Evidently that makes financing companies nervous...

In the end, our new deal is for double the amount, 6-7 years newer. 10% down, 180 mo, under 7%. Still not ideal, but given the sad state of availability of rigs in this price range, we're taking it. No pre-payment penalty so we'll probably pay it off within 5 years or so. Bottom line is that we preserved as much cash as possible and got all our payments/insurance well within our target numbers. Used RV (our home) plus one new car plus insurance at under 20% of our income. No other debts or obligations. If we can't manage to full-time at this level we're doing something wrong!

[777 Driver]

Originally Posted by dixonge

Bottom line is that we preserved as much cash as possible and got all our payments/insurance well within our target numbers.

There are those who suggest that any debt is a bad thing. Others suggest that having an adequate cash reserve is essential and that depleting your only cash reserve just to avoid debt can leave you in crisis if you find yourself unexpectedly in need of cash. As long as you have sufficient cash flow from pensions, Social Security retirement, etc. to meet your monthly expenses, having some cash available for an emergency is a good thing.

Glad that you found a way to make it work for you.

Take care,
Stu

[dixonge]

Originally Posted by 777 Driver

There are those who suggest that any debt is a bad thing. Others suggest that having an adequate cash reserve is essential and that depleting your only cash reserve just to avoid debt can leave you in crisis if you find yourself unexpectedly in need of cash. As long as you have sufficient cash flow from pensions, Social Security retirement, etc. to meet your monthly expenses, having some cash available for an emergency is a good thing.

Glad that you found a way to make it work for you.

Take care,
Stu

Yes. We got out of debt when we first started prepping for ER. It was a big help for various reasons, but it was for a specific scenario. We were very leveraged.

Now, not so much. Still strategic, pay as little interest as possible. No credit card debt beyond 30 days ever.

[777 Driver]

RV ownership is fraught with opportunity for something to pop up unexpectedly that the best solution is a cash solution.

The ability to self insure for those situations requires an adequate cash reserve. It seems, to me, that it's a good thing to have a cash reserve when owning an RV.

Take care,
Stu

[powerboatr]

wow thats insane, my credit union is at 2.7 %

[Filthy-Beast]

Originally Posted by powerboatr

wow thats insane, my credit union is at 2.7 %

2.7 for new car is very different than buy a used RV, what is their rate for a used motor home?

[dixonge]

Had a talk with our dealer manager/finance guy. Two different finance companies passed on our deal, a third took it but only at 6.99%. I inquired about the reasons behind this, and it actually makes sense. The last time we had any sort of 'installment' plan was a decade ago. Since then all we have is credit cards which are always paid off monthly, no carry-over payments, no interest. From a credit perspective, we have a lack of history. We have also put most things in my name, which hurt my wife's credit history.

Any way, in a year we'll have the RV payment and a car lease with 12 months of payments and we can refinance if we need to...

This is something you don't hear a lot about when people rant about the wonders of debt-free living...

[Machine99]

My dealership got me around 4.2% through Bank of America a couple months ago for our 2017 Tiffin.

[HDGoose]

Originally Posted by dixonge

Had a talk with our dealer manager/finance guy. Two different finance companies passed on our deal, a third took it but only at 6.99%. I inquired about the reasons behind this, and it actually makes sense. The last time we had any sort of 'installment' plan was a decade ago. Since then all we have is credit cards which are always paid off monthly, no carry-over payments, no interest. From a credit perspective, we have a lack of history. We have also put most things in my name, which hurt my wife's credit history.

Any way, in a year we'll have the RV payment and a car lease with 12 months of payments and we can refinance if we need to...

This is something you don't hear a lot about when people rant about the wonders of debt-free living...

Credit rating is not so much as your ability to repay as it is about how well you play the system. I know folks who have had things happen after paying cash for 10-15 years. Then they find they cannot buy the house or living space, and some had issues renting, because of the lack of credit history. Not saying it is right, it is a huge marketplace and they prefer those who pay them well.

[jim58]

Originally Posted by HDGoose

Credit rating is not so much as your ability to repay as it is about how well you play the system. I know folks who have had things happen after paying cash for 10-15 years. Then they find they cannot buy the house or living space, and some had issues renting, because of the lack of credit history. Not saying it is right, it is a huge marketplace and they prefer those who pay them well.

You hit the nail on the head. Credit and debt is a big game. Having a cash reserve is critical if someone is full-timing it. But the game still needs to be played.



Use a credit card and then pay 98% a week later. Still remain almost debt free but at the same time showing a good history of use and payback.



Keep a couple hundred on another card and make steady payments.



There's a few FICO type forums that explain how to play the game. Ending up with an 800+ score is doable. A little debt is needed to pull it off. But, like you said, a continuing history is a big part of the game. Not to mention a bunch of other factors.



Unfortunately, a tiny bit of debt is a necessary evil if someone wants to achieve a real good credit score.


Jim58

[Solo_RV_Guy]

Originally Posted by jim58

Use a credit card and then pay 98% a week later. Still remain almost debt free but at the same time showing a good history of use and payback.

Jim58

The last "new" credit card I got (from either Chase or Citi) had the proviso that they would not accept pre-statement cycle payments for the first 90 days of account use.

It takes months to make a significant improvement in a FICO score but only a few weeks for derogatories (slow/no pay, sent to collection, write downs, job loss, court judgment etc) to negatively impact the score.

There are different models within FICO that use different weighting for individual evaluation criteria - some more greatly favor steady payments, others the ratio of credit us to available credit, home ownership vs renting, etc. The creditor decides what flavor of report best suits their lending practices.