Financing an RV

Payments are fixed amounts over the course of the loan and include both principal and interest. At the beginning of the loan the interest portion is larger than principal repayment portion. As you get farther along on the loan the principal repayment portion increases, while the interest portion decreases.

There are no pre-payment penalties. That means that you can pay off the entire loan or pay additional amounts at any time. Any amount paid which is above the standard payment is applied to the unpaid balance. In fact, some people make additional principal payments in order to reduce their overall interest cost.

In most cases, the interest on an RV loan is deductible for Federal and some state income tax purposes. This could reduce your interest costs by as much as 40% or more, depending on your tax bracket. The RV must be used as collateral for the loan and it must also have "sleeping, cooking and bathroom" facilities. There are also some other requirements, which most people are able to meet.

For more information you can look at IRS Code Section 280A(f)(l) or check out the definition of a "qualified home" on page 2 of IRS Publication 936, "Home Mortgage Interest Deduction." (You will need Adobe Acrobat Reader for this.)

And, of course, it would be best to check with your accounting professional to determine whether or not the interest is deductible in your particular situation.