The RV industry faced difficult times in 2008 and 2009, but in 2010, RV sales began to bounce back, with slight increases in towable sales and motorhomes priced under $100,000. The industry troubles were bdue in part to consumers facing more credit challenges, such as bankruptcy. Qualifying for an RV loan after bankruptcy is difficult, but it is possible to finance a new RV purchase in some cases.
Time Frame
Banks and finance companies that commonly make RV loans are nervous about offering RV financing within a short time after a person has filed for Chapter 7 bankruptcy. Although a debtor is prohibited from filing for another Chapter 7 bankruptcy for at least eight years, it will be difficult for many borrowers to finance an RV purchase within the first three to four years following a Chapter 7 discharge. Banks want to be sure that the potential borrower has corrected the financial issues that led to the first bankruptcy.
Credit Rebuild
When a borrower files for Chapter 7 bankruptcy protection, his credit is often severely damaged. Borrowers who rebuild their credit quickly after the bankruptcy discharge will be more likely to borrow to finance an RV post-bankruptcy. Good ways to rebuild include secured credit cards and secured installment loans. Once a borrower has rebuilt his credit, and proven over a two- to three-year period that he can pay his bills on time, he will have an easier time financing an RV.
Equity Position
Banks and finance companies review a potential borrower's equity position when he applies for a loan. If a borrower makes a larger down payment, the bank's position is more secured when the purchased RV loses value, and this improved equity position may encourage the finance company to make a loan that it would not otherwise commit to. Banks are much less likely to approve low down payment loans with close to 100 percent loan-to-value ratios, particularly for borrowers who have had a Chapter 7 within the last few years.
Other Considerations
The circumstances which led to your bankruptcy can often be as important as the bankruptcy itself. If a Chapter 7 was due to circumstances largely beyond your control, such as from medical expenses, the lender may be more lenient with its underwriting guidelines. If your bankruptcy is from overspending on consumer debt, the lender will be more cautious, and want to see a longer history. Even if you can secure RV financing after a bankruptcy, the interest rates are likely to be much higher than for borrowers with unblemished credit.