If you’re preparing to purchase a caravan and arranging a loan, that’s a good question to be considering. But not a question that can be simply and easily answered with a 100% definitive response. But at Jade Caravan Finance we’re up for a challenge and have a wealth of finance knowledge to share, so here’s our explainer of secured vs unsecured caravan loans.
First, we’ll provide you the details of the features of each loan and then offer some possible scenarios around loan types.
Personal Caravan Loans Compared
Some elements of each loan are different while some are the same:
- Secured loans have fixed interest rates, unsecured loans have variable interest rates.
- The lender uses the caravan (or RV, camper trailer or mobile home) as security against a Secured Loan. With an unsecured loan, as the name implies, there is no security. As there is no security, the interest rate on unsecured loans is usually higher than secured loans.
- With attracting a higher interest rate combined with the variable as opposed to a fixed interest rate, the unsecured loan will usually result in a larger total amount of interest paid compared with a secured loan over the same loan term.
- Secured loans have minimal break fees if you payout the loan before the end of the loan term while and the unsecured loan has no break fees.
- Lenders are not always prepared to accept older vehicles as security against caravan loans. The concept of the security is that if the borrower defaults, the lender can repossess the caravan and sell it to recoup monies owed. If the lender does not consider an older caravan to have sufficient value, they may not accept it as security.
- When arranged through Jade Caravan Finance, both secured and unsecured loans feature our signature Jade best interest rates guarantee.
- Both loan types feature fixed monthly repayments and a fixed loan term.
- Both loan types all extra payments.
Scenarios and Considerations
As each caravan loan application has its own individual requirements and specifications, we are not in a position to advise the ‘best’ loan type for you without further discussion and consideration of your individual situation. With all financial decisions, we advise people to seek expert advice from their financial advisor.
What we can do, is pose some scenarios and ideas for you to consider when deciding on whether a secured or unsecured caravan best suits your needs.
- As mentioned above, if you’re purchasing an older caravan the lender may not be prepared to accept it as security for a secured loan. In that instance, you may opt for the unsecured loan.
- If you are purchasing an old van at a great price that you intend to restore and as such increase its value significantly, you may not want to put the van up as security. If you are close to completion of the restoration and spent a lot of money on the project, the caravan will likely be worth a lot more than you paid for it and as such your loan.
- If you’re buying a brand new or fairly new caravan which you intend to have for the long term and you want the cheapest loan option available, then a secured caravan loan would be your natural choice.
- If you’re paying a significant deposit on your caravan or have a good trade-in and your caravan loan represents a lesser percentage of the value of the van, you may not want to offer the entire van as security against the loan.
- If you expect or anticipate you will be in a position to finalise the loan before the end of a standard loan term, eg 4-5 years, then an unsecured loan may be preferred to avoid the break fees incurred with a secured loan.
- If you are wanting certainty around your caravan loan with a fixed interest rate that results in fixed monthly payments with no variable interest rate so you can plan your finances into the future, then a secured caravan loan would offer you that level of certainty.
These are just a few scenarios to start you thinking around which loan may best suit you and your caravan purchase.
You don’t have to wait until you make a firm decision before you start the loan process. You can contact Jade Caravan Finance at any time to discuss your loan and request a quote for your caravan purchase. If you would like to arrange finance before you start looking at vans, ask about our pre-approved caravan loan service.
We can source you an offer based on the price range you are considering, and have your application all approved and your loan sorted. This can provide greater confidence when you are negotiating with sellers.
To discuss a secured or unsecured caravan loan, contact Jade Caravan Finance and speak with our consultants. Call 1300 000 003