How to Assume an RV Loan

by Teo Spengler

To assume a loan means to take over the loan and agree to make the remaining payments on it. If you wish to buy a used RV and the owner has an assumable loan, you can finance the purchase by paying off the owner's equity and assuming the existing loan.

Assumption of a loan

Generally, if one person wishes to buy a house or an RV, she saves enough money to make a down payment, then takes out a loan from her bank for the remaining purchase price. However, the buyer has more options if the seller has a loan that is assumable. That means that when the owner took out a loan to buy the property, the lender agreed that the loan could be assumed at some point in the future by another party, usually with lender approval.

To assume a loan means to agree to take over legal responsibility for paying off that loan. Generally, loan assumption takes place during a sale of the property, but it doesn't have to. For example, a high-earning adult child could assume his elderly parent's mortgage simply to help them out.

Assuming an RV loan can be better for a buyer than getting a new loan. It may be easier to assume a loan than to qualify for an entirely new loan, so someone with less-than-excellent credit may have a better chance to buy an RV if she can assume the loan. Also, the interest rate on an existing loan may be lower than the interest rate the buyer finds currently available.

Steps toward assuming an RV loan

If you hope to purchase a used RV by assuming the seller's loan, you first must find a seller with an assumable loan. Many RV loans are not assumable. That means that the loan cannot be transferred from the seller to the buyer.

The second consideration is loan qualification. Although it may be easier to qualify for a loan assumption than a new loan, the lender must weigh the buyer's credit history and finances to determine whether to permit loan assumption. Generally, when you assume the loan, the seller is released from liability on the loan. That is why the lender may want to see all of your financial information before agreeing to a loan assumption.

If the present owner intends to stay on the loan, your credit may not be examined as carefully by the lender. In this situation, if you ever find yourself unwilling or unable to make a loan payment, the lender can go after the seller for the remaining loan amount. This is not a very favorable position for the seller and is usually avoided except in intrafamily RV sales.

The third element to resolve is the question of the down payment. If the market value of the RV is more than the amount of the loan you are assuming, the owner of the RV has equity built up in the motor home. You and the owner will have to agree on how much of that amount you need to pay in order to buy the RV. This will be the down payment and is usually paid in cash.

About the Author

Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Spengler splits her time between French Basque Country and California.