Caravan finance, explained simply

The basic idea

Caravan finance is a loan used to buy a van, usually secured against the van itself. You borrow an amount, repay it over an agreed term, and pay interest and any fees on top. The lender generally holds security over the caravan until the loan is repaid.

What affects the cost

• Loan amount and deposit. A larger deposit generally means less to borrow.
• Term. Longer terms lower each repayment but usually cost more in total interest.
• Fees. Application, establishment and monthly account fees can be included in the comparison rate.
• Age and type of van. Lenders often treat new and older vans differently.
• Your circumstances. Lenders assess income, expenses and credit history under responsible lending obligations.

An illustrative example

Suppose someone borrowed $60,000 over 7 years at an example rate of 9% a year. Repayments would be roughly $965 a month, and about $21,000 in interest would be paid over the term. This is a simple illustration only, not an offer. Real rates, fees and repayments vary by lender and circumstance, and the comparison rate shows the cost more fully.

Questions to ask before signing

1. What is the comparison rate, and which fees does it include?
2. Can I make extra repayments without a penalty?
3. What happens if I want to sell or trade the van before the end of the term?
4. What insurance does the lender require?
5. Is the rate fixed or variable?

Where to read more

ASIC's MoneySmart site has independent guidance on borrowing, car loans and comparison rates. For tow-vehicle and van weights, speak with your dealer and check the manufacturer's information.

Our blog goes deeper on topics like ownership costs, insurance and travel budgeting. When you want to explore options, you can start a free, no-obligation enquiry.