Should you co-buy an RV?
- Co-buying is different from co-signing on a loan.
- The co-buyer shares equal ownership of the RV with the primary borrower.
- Both co-buyers are responsible for monthly payments, taxes and insurance.
- Not all RV lenders allow a co-buying arrangement.
Many an RV enthusiast have had their dreams of the road dashed at the financing table. Lenders have very specific financial profiles in mind when evaluating borrowers for an RV loan. If your credit score, debt-to-income ratio or the consistency and amount of your income doesn’t meet their standards, more often than not a rejection is in order.
As with other types of loans, you can improve your chances of approval by working on strengthening your credit or saving up for a larger down payment. Those strategies take time, however. If you want to get approved for an RV loan quickly, there is another option you can pursue: co-buying.
How co-signing works
Though similar in name, co-buying is a different arrangement from co-signing. With co-signing, the co-signer effectively guarantees the borrower’s loan by pledging to take responsibility of the loan should the borrower stop making payments or default on it.
Typically, co-signing is used in situations where the borrower has no credit or bad credit that would prohibit them from getting a competitive interest rate or obtaining financing altogether. By backing the loan with their stronger credit score, a co-signer can help a borrower qualify for better financing.
The borrower has full title to the vehicle and is responsible for all monthly payments, taxes and insurance. While the loan goes on the co-signer’s credit report, they have no role in the payment process unless the borrower is unable to pay back the loan, in which case the co-signer becomes legally responsible.
While co-signing is a common arrangement for certain loans — such as a parent co-signing on a child’s student loan — only rarely do lenders allow for co-signers on RV loans. Lenders view RVs as luxury vehicles and consequently have tougher credit and eligibility requirements. Using a co-signer alone does not offset the lender’s risk enough to help the borrower qualify.
How co-buying works
With a co-buying arrangement, both buyers have equal ownership of the asset. This means that the co-buyer takes equal title to the RV and both parties are responsible for the same monthly loan payments, taxes and insurance. Joint ownership also means that the co-buyer has equal rights to the RV’s use and may also be required to carry insurance, regardless of whether they are driving the car.
As with a co-signer, a co-buyer can be any individual, but lenders typically prefer that the co-buyer is someone invested in the purchase of the RV, such as a parent or spouse. The loan will appear on both parties’ credit reports and affect their debt-to-income ratios.
A co-buyer can usually boost your eligibility if you have no credit, insufficient income or a high debt-to-income ratio. If you have poor credit, however, lenders are less likely to deem a co-buyer sufficient protection for the loan. Having a co-buyer does not guarantee that you will qualify for an RV loan, either. If the co-buyer has significant debt themselves, they may, in fact, negatively impact the application by pushing the buyers’ combined debt-to-income ratio higher.
Before co-buying an RV, make sure that you and your co-buyer’s responsibilities are clearly defined. If your co-buyer is only helping you obtain financing and has no interest in the RV, you may want to draw up a repayment contract with them. Formalize the repayment timeline, whether you will refinance the RV loan when your financial situation changes and when you will assume the RV title in its entirety.
The safest and most financially prudent way of financing an RV is still to build your credit score, save for a larger down payment and purchase the RV without secondary support. If, however, you have a willing co-buyer and are wholly confident in your ability to repay the loan in your current financial situation, compare lenders that accept co-buyers to see what loans may be available to you.