Can you get caravan finance with bad credit?

Young couple talking while standing at the caravan.

With summer weather fast-approaching and staycations more popular than ever, there’s never been a better time to think about getting a caravan or motorhome.

But the luxury of mobile holiday accommodation doesn’t come cheap. Unless you have the cash to-hand, you’ll likely need some form of finance.

In this guide, we’ll cover everything you need to know about caravan and motorhome finance, including lower or bad credit options, so you can fund your free roaming with confidence.

What is caravan finance?

Caravan finance is a way to pay for the cost of a caravan or motorhome when you don’t have the ability to cover the full amount in cash up front.

It’s similar to car finance, with the main difference being that there are often specialist providers in addition to more general car finance companies.

How does caravan finance work?

Broadly speaking, caravan finance will usually either come in the form of a loan or a lease.

When using a loan to pay for a caravan, you will be borrowing money from a lender to buy the vehicle outright. This money is then paid back over time in installments, also referred to as repayments, with additional interest applied.

When leasing a caravan, you are effectively hiring it for an agreed period of time. At the end of the lease period, you may have the option to purchase the caravan outright, depending on the type of lease you have.

We’ll cover the different types of caravan finance in more detail further on. Before we get into that, it’s important to consider whether finance is right for you.

Do I need caravan finance?

If you’re still weighing-up whether or not caravan finance is the right choice for you, here are some things to consider, depending on your circumstances:

  • If you have the full amount available in cash: Paying for the caravan outright with a lump sum, if you have it available, will allow you to avoid interest and cost the least overall.
  • If you have some of the amount in cash: You can partially pay for the caravan with cash and use finance to pay for the remainder. This can also be good if you want to treat yourself to a higher-end model than you were originally planning.
  • If you don’t have the funds available: Find a finance deal to fund your caravan or motorhome.

What types of caravan finance are available?

There are a number of types of caravan finance available, both in the form of loans or leases. Here are some of the most common options worth considering:

Personal loans for caravans

An unsecured personal loan allows you to borrow the cash needed to purchase the caravan or motorhome outright. You then repay the loan to the lender on a monthly basis, until the debt—plus any interest—is repaid.

As far as the seller of the caravan is concerned, this isn’t any different to paying in cash. Once you have bought  the vehicle, it will be yours and it will be up to you to repay the loan provider according to the terms of your agreement.

Key benefits:

  • Own the vehicle outright from the beginning
  • You don’t need to be a homeowner to apply for an unsecured loan
  • If you have a good credit rating, you may only need to pay back a small amount of interest
  • As you own the caravan, you can choose to sell it at any point, providing you continue to repay the loan
  • Generally a cost-effective way to pay for a vehicle, paying in cash also means you may be able to negotiate a better price with the dealer

Considerations to keep in-mind:

  • You can’t trade the caravan in for a newer model at the end of the loan
  • Unsecured loans have lower borrowing limits, so may limit your options
  • Your eligibility and the terms of the loan will depend on your credit score
  • You must be able to keep up with monthly repayments, otherwise your credit score may be impacted

Secured loans for caravans

If you are looking to borrow a higher amount, maybe for a top-of-the-range caravan or motorhome, then secured homeowner loans are another option to consider.

A secured loan works similarly to an unsecured personal loan, except that the debt is tied to your property as a form of collateral for the lender. This means that loan providers will be more willing to lend you larger amounts of money over a longer period of time.

However, it is important to note that your home may be repossessed if you do not keep up with repayments.

Key benefits:

  • You’re able to borrow higher amounts and with longer repayment terms than you’d get with an unsecured loan
  • You’ll own the vehicle outright, meaning you can choose to sell it at any point
  • Less dependent on your credit score to get approved

Considerations to keep in-mind:

  • Only available to homeowners
  • Your home may be repossessed if you are unable to keep up repayments
  • As you own the vehicle outright, you won’t be able to trade it in for a newer model at the end of the loan

Conditional sale for caravans

A conditional sale is another form of caravan and motorhome finance that allows you to own the vehicle, while spreading the cost over a longer period of time.

It’s similar to a loan in how it works, only the debt is secured against the caravan itself until it has been repaid.

To start, you pay an upfront deposit of typically around 10-20% of the caravan’s value. You then make subsequent payments at a fixed interest rate over a fixed repayment term until the debt is cleared. Once the debt is paid, the caravan is yours.

This can be a good option if you know you want to own the caravan or motorhome outright, but don’t have the funds to pay for it upfront in full.

Key benefits:

  • Can help if you have some of the money saved, but not enough to buy outright
  • Automatically own the caravan at the end of the repayment term
  • Because the loan is secured against the car, it’s less dependent on your credit score

Considerations to keep in-mind:

  • You don’t own the caravan until the end of the agreement, meaning you can’t sell or modify it without the lender’s permission
  • Less flexibility over what you can do at the end of the agreement compared to other options
  • The lender could repossess the caravan if you don’t keep up with repayments
  • Monthly payments can be pricier than a personal contract purchase or lease

Hire purchase for caravans

A hire purchase agreement is similar to a conditional sale: You pay a deposit upfront, followed by a series of regular repayments until the value of the vehicle—plus any interest—has been repaid.

The main difference between the two relates to what happens at the end of the contract.

While conditional sale has you own the vehicle outright at the end of the agreement, hire purchase provides the option to pay an additional fee to own the caravan, or hand it back to the dealership, giving you more flexibility.

Key benefits:

  • Helps to spread the cost of the caravan, if you don’t have the money to pay for it in full
  • Finance is secured against the vehicle, making it less dependent on your credit score (though this will still affect the rates you are offered)
  • Gives you the freedom to choose whether you want to own the vehicle at the end of the contract

Considerations to keep in-mind:

  • You don’t legally own the caravan or motorhome until you’ve made all the payments, including the final fee to purchase the vehicle
  • Interest rates can be higher than an unsecured personal loan, but this will ultimately depend on your credit rating
  • You can’t sell or modify the vehicle without the lender’s permission while you’re still making repayments

You can learn more about the advantages and disadvantages of hire purchase in our complete guide.

Personal contract purchase (PCP) for caravans

Personal contract purchase is another way to finance a new caravan or motorhome.

Similar to a hire purchase, with PCP you pay an upfront deposit, followed by monthly installments. In addition, you can pay an optional fee to own the vehicle outright at the end of the term.

The key difference between a hire purchase and a personal contract purchase (PCP) is in the way the monthly costs and optional fee are calculated. Hire purchase calculates the monthly payments based on the total cost of the vehicle, with a small “option to purchase” fee at the end of the agreement.

PCP, on the other hand, bases monthly payments on the difference between the initial price of the caravan and its predicted value at the end of the term—also known as Guaranteed Minimum Future Value (GMFV). At the end of the agreement, you then have the option to purchase by making a final “balloon payment”, based on the GMFV.

Simply put, PCP gives you lower initial monthly repayments than hire purchase, but at the cost of a larger “option to purchase” fee at the end of the contract.

A personal contract purchase (PCP) might therefore be best if you’re hoping to upgrade to a newer caravan or motorhome model every few years.

Key benefits:

  • Freedom to swap to other caravan models every few years
  • Lower monthly payments than hire purchase
  • Less impacted by drops in the caravan’s value

Considerations to keep in-mind:

  • Higher end-of-contract “balloon payment” to own the vehicle, compared to the equivalent with a hire purchase agreement
  • You don’t legally own the caravan unless you make the final payment
  • Additional terms and conditions, like mileage limits, can be applied by the provider
  • Mostly only available for new vehicles, rather than used, due to upper age limits

Personal contract hire (PCH) for caravans

Personal contract hire—commonly referred to as leasing—is very similar to personal contract purchase, only you cannot buy the vehicle at the end of the term.

With PCH, you pay monthly installments to a lender for a set period, at the end of which you return the vehicle to the leasing company.

Key benefits:

  • Flexibility to change your vehicle every few years
  • Lower overall cost than personal contract purchase
  • No need to worry about depreciation of the caravan’s value

Considerations to keep in-mind:

  • There is no option to buy at the end of the contract
  • Monthly payments can be higher than a personal contract purchase
  • Strict rules and restrictions will typically be in place, like mileage limits
  • You will be charged for damages if the vehicle is returned in a bad condition

Finance for different types of caravan

In addition to the various options for financing a caravan, these may vary further depending on the type of vehicle you’re looking to purchase.

Touring caravan finance

A touring caravan is a form of lightweight mobile home that is fixed to a set of wheels and a trailer, so that it can be easily towed by a car.

Any of the finance options outlined earlier in this guide will be suitable for a touring caravan, so it’s simply a case of reviewing and deciding what’s best for your needs.

Caravans in caravan park

Static caravan finance

A static caravan is a bigger and heavier mobile home, designed to permanently stay in one location. While it offers some of the same comforts as a touring caravan or motorhome, it’s closer to a holiday home than a more mobile caravan.

As a result, finance options cater more towards purchase, with personal contract purchase, hire purchase and personal loans being the most commonly available methods of financing.

Static caravan

Motorhome finance

A motorhome is a fully-functional engine-powered vehicle, combined with the luxuries of a mobile home. You can drive it without needing to tow anything with a car, which can make for a more pleasant overall driving experience.

Like touring caravans, you will generally be able to finance a motorhome with any of the methods outlined in this guide.

A motorhome parked in a forest clearing

Can you get caravan finance on bad credit?

No matter how many varied caravan finance options are available, all of them will at some point check your credit score as part of their process.

Your credit score is a number value that represents your borrowing history, used by finance providers to determine whether you are eligible.

A good credit score will indicate a healthy record of borrowing, meaning that finance providers will be willing to offer you better rates and terms. A low credit score might indicate that you’ve had limited or problematic borrowing in the past.

A lower credit score doesn’t necessarily mean you can’t get caravan finance, though it may result in a lower credit limit offer or higher interest rate. There are ways to improve your credit score, however, so this might be something that is worth taking a look at.

As outlined earlier in this guide, hire purchase, personal contract purchase and secured homeowner loans are all typically less-dependent on your credit score for approval.

How to check your caravan finance eligibility

It’s easy to find out whether you’re eligible for caravan or motorhome finance. Simply head over to our eligibility checker, select “Caravan or motorhome” as the loan purpose and then enter a few additional details about yourself.

The free tool will then run a “soft search” on your credit report. This means that it doesn’t appear on your credit history. The tool will check your eligibility for personal and secured loans, then suggest lenders to suit your needs.

You can then browse these in order to select one that feels right for your desires and financial circumstances.

What is guaranteed caravan finance?

You may have heard the term “guaranteed caravan finance” in the past, claiming to be a form of caravan finance that gets approved, no matter your eligibility.

Not only does guaranteed caravan finance not exist, it’s illegal and a common source of scams. It’s important to stay wary and steer clear of any provider claiming to offer this.

As a finance broker, we make it easy to safely browse multiple lenders, many of which offer specific options for people with a lower credit rating.

How to apply for caravan or motorhome finance

To get started with comparing your finance options for a caravan or motorhome, head to our loan eligibility checker and enter a few basic details.

Be sure to mark “caravan or motorhome” as the desired purpose to see accurate results.

Now that your caravan finance is sorted, the only thing left to think about is deciding where you want to go first. The open road and all of its possibilities await!