When it comes to exploring nature – Australia is up there with one of the best places in the world. From our large rugged outbacks, to our picturesque coastlines, caravanning around Australia is extremely popular, and for good reason.

If a trip around our beautiful nation, or just a quick weekend trip, is on the cards for you, you may be considering buying your own caravan. Generally, caravans are pretty big investments – especially when it comes to the more advanced models. So, before you part with your hard-earned money – or sign up for a lengthy loan – you should consider a few things first. 

Secured or unsecured loan?

Caravans aren’t cheap –  even modest models start from around $50,000 and can cost upwards of $100,000 for deluxe models. So, it shouldn’t come as much of a surprise that a lot of caravans are financed.

If you’re considering getting a loan to buy a caravan, you’ll generally have two options: a secured loan or an unsecured loan. 

Secured loans are finance that’s lent with security, and that security will be the caravan you intend to purchase. If you default on your payments, the lender will be able to reclaim the caravan to cover the payments.

Unsecured loans are similar to personal loans, the bank will grant you a loan for a specific amount, and you can spend the money as you choose. While a bank won’t be able to repossess the caravan through the loan specifically, if you miss payments, they will still be able to repossess goods that you own to the amount that you owe.

Because secured loans are lower risk than unsecured loans, they generally come with a lower interest rate.

The loan terms

All loans are slightly different, and will have varying interest rates, loan length, and frequency of repayments. Aside from the interest rate, the other factors can usually be altered depending on the borrower’s specific situation. 

If you are taking out a loan in order to finance a caravan, you should think about what terms suit you best. For example, if you get paid monthly, you may want to arrange for the repayment amount to come out once a month, a few days after payday.

On the other hand, when determining the length of a loan, it’s a good idea to do some basic maths, and work out how much more you’ll be paying in interest, for a longer loan term, and whether this is worth it to you.

Check if there is an encumbrance

An encumbrance on a caravan simply means that there is money owing to a financial institution for the mobile home. If you are taking out a secured loan, a bank will usually conduct this check for you and won’t approve the loan if there is an encumbrance.

However, if you’re taking out an unsecured loan, you should run this check for yourself. If you buy a caravan that has an encumbrance on it, the financial institution is able to claim back the trailer if the borrower doesn’t make payments – regardless of the fact that the ownership has changed hands.

Conducting an encumbrance check is easy, and you can do so on the Department of Transport website that’s specific to your state. You will need to get the registration number of the caravan in order to run the check.

Read the fine print

Don’t get tricked by hidden fees and charges. Before signing on the dotted line for a loan, you should have a thorough read through the associated terms and conditions. 

For example, some financial institutions charge fees for early or extra repayments. If you think that there may be a chance you can pay the loan off early, you should always ensure that there’s no penalties for doing so before you agree to the loan.

Don’t forget about the extras

The outright price that you’ll pay for a caravan is almost never the total amount you’ll need to pay. Of course, you may want to do small upgrades, like install hot water or replace the mattress. But, don’t forget about other costs like stamp duty, registration, and insurance. 

Before taking out a loan, you should make a list of everything that needs to be paid in order for you to get the caravan on the road. If these extras are above your budget, you can probably include them in the overall loan amount and pay them off gradually.