How to Finance a Truck: That truck has been on your mind for some time. It’s large, beautiful, and does everything a truck should. Even before you knew it, you had started to plan for truck financing. The price tag made it seem like a nightmare. That dream vanished before you could blink.
If you have a clean credit record, price shouldn’t be a problem. You will need to work harder to obtain a truck loan if you have poor credit or a bad track record. It is possible to get the most money with the least hassle.
Seven steps to make your bad credit history a chance for guaranteed semi- or commercial truck financing.
Take a hard look at your finances.
People shop for trucks before they look for financing. It’s best to do it the opposite way. Truck prices can be very high, but your budget can’t. You should also know that financing can look very different depending on the type of truck you are looking for. Commercial truck financing will be additional than that for personal-use trucks. Semi-truck financing may also differ.
You can speed up the process if you have more information ahead of time. You might buy the most expensive option if you need to know how much you can afford. Quality sometimes comes at a lower price. Because they, new trucks, can quickly lose value. However, moderately used trucks are still in good condition and at a great price. You don’t want the truck to break the bank. It’s much easier to narrow your choices to the best fit for your needs if you have a set price range.
You need to know the following information to calculate how much you can afford per month.
* Monthly income before taxes. What is your monthly income before taxes?
* The trade-in value. What price will the dealer pay if you have a truck that you can trade in for the truck?
If you don’t have a loan, the above values can plug the numbers into this car affordability calculator. Then, change the other fields to zero, and voila! You will get a rough idea of the range within your budget if you can pay cash.
Stay tuned if you prefer to pay your truck off-line with credit. We’ll get to it in a moment.
All paperwork must be completed together.
Suppose you purchase a truck for personal use. You must provide proof of business documentation if the truck is for business or commercial purposes. The type of business you are in depends on the “proof.” Take, for example:
If you have a new sole proprietorship/partnership, you must present an Employer Identification Number (EIN) or a Doing Business As (DBA) name to your lender. An EIN can be obtained free of charge via the IRS. Via the U.S. Small Business Administration.
If you have an old sole proprietorship/partnership (this means your business has been running for at least a year), you can submit your IRS Schedule C as a sole proprietorship with at least one year of income or an IRS Schedule K-1 as a partnership.
You can print a record of your company from the Secretary of State’s website if you are an LLC/corporation. You can also have your history checked online by the lender.
Other than proof of business, you may need to provide additional documents to prove that you are able and authorized to repay your loan. If you are an owner-operator, the lender may ask for a Commercial Driver’s License, a U.S. Department of Transportation (USDOT), and a Motor Carrier Number (MC).
The lender may not request these documents, but you never know when they will come in handy. Although it may seem overwhelming, once all the paperwork is in place, you will find that your future endeavors are much more accessible.
Finance the truck that interests you.
Lenders will not finance just any truck. Lenders will also consider whether the truck is new or used if it’s a semi or a dump truck and the truck’s value. Either you can remember it all or put yourself in the lender’s shoes. What if you were the lender?
Money should be one of many considerations. It’s essential to consider the truck’s size and fuel efficiency. To better understand what you will be looking for, read our post on truck class. It would help if you kept in mind that every truck type will offer different financing options.
You can choose whether semi- or commercial truck financing is right for you.
Which type of truck do your drivers drive? Semi and commercial truck financing are two of the most popular options. Knowing the purpose of your vehicle will help you decide which type of financing is best for you. You should look for companies specializing in truck financing if you are a business manager. If you own a semi-truck, the same goes.
We have compiled information that is unique for both categories. Skip to the next section if neither type applies to your vehicle.
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Commercial truck financing has one advantage: interest rates. These contracts typically last around 10 years, depending on their lender.
The downside is that interest rates can go up to 30%. However, financing is possible if you budget well. Gives you more incentive to pay your bills on time.
Application fees and credit check fees are two other factors that can impact your financing costs. When budgeting, be sure to take this into account. Bad credit is not an issue for commercial truck financing. Although your options are limited, many companies will work with you to improve your credit score.
Semi Truck Financing
You can get guaranteed semi-truck financing if you plan well and find the right lender. The rate may be higher if you don’t have an excellent credit rating. However, you will pay more if your truck is used frequently and considered high-risk. These trucks are often used for transporting hazardous materials and frequently travel.
Remember that lenders will use the truck as collateral to protect their finances. That is why the price tag is so high. But don’t be alarmed. Some companies offer semi-truck financing in-house, depending on the lender. You can get funding directly from the truck seller through in-home financing. Great for those with low credit scores.
Other companies go so far as to offer no credit check with semi truck financing. A good thing about this is that you can finance even if your credit score is not perfect. These situations can have higher interest rates and a strict repayment plan. Consider opening a credit card with 0% APR to finance part of your truck.
Best Truck Loans
Here is a list of loan companies worth investigating. This list can be helpful, but you should still research and compare your information (truck, business, etc.) with the company. You may need help finding the right company for you.
Trust Alliance Capital
- The Better Business Bureau has rated this company as the best.
- Covers a large variety of semi- and commercial vehicles.
- Credit scores are flexible.
CAG Truck Capital:
- Including bankruptcy, bad credit scores, startups, and other financial institutions.
- It has been in operation for nearly 4 decades.
- Provide engine overhaul financing.
- Leasing for veteran and new truck owners.
- Services available for all types of trucks
Calculate your down payment.
It is difficult to answer the question, “How much should my down payment be?” But some factors will increase your initial expenses.
Your credit score is low. A credit score of 700 or higher is “good.” Anything more down, and you will need to improve your credit quickly.
You are a startup. You’re a new business owner.
You are an owner-operator. Owner-operators typically own one truck. The owner-operator is usually responsible for one truck. If the truck goes down, it will impact their ability to repay their loans.
Private parties are buying your goods. Private-party transactions are more well-structured and secure than dealer transactions. Makes them more challenging to verify and, thus, riskier for lenders.
You are buying a used truck. The older a vehicle is, the more likely it will be damaged and need future repairs.
Low cash reserves are a problem. It’s self-explanatory.
These factors can, however. If you have low credit scores, but your business has been running for at least two years, your down payments will be lower than those with poor credit or who have been in business less than one year. This guide will give you an exact estimate of how much your down payment should be. These are only estimates.
Calculate your monthly installments.
You already know this:
- The price or range of the truck that you are looking to purchase.
- If applicable, the trade-in value for your current vehicle.
- The monthly amount that you can afford.
- What amount of a down payment can you afford.
These numbers will tell you how much you’ll pay each month.
It depends. You can use the truck financing calculator to calculate your monthly payments if you have a current interest rate and principal amount. Consider a loan with different terms if the monthly payments are more than you can afford.
Locate a reliable financing company.
There are many places you can apply for a truck loan. You can work with national banks, local banks, credit unions, and online lenders.
It is a good rule of thumb to remember that the more reputable the company, the stricter the lending requirements. You might have trouble borrowing money from banks or credit unions if you have poor credit. These places can be a reliable source of truck financing if you have a good credit history.
Online lenders and dealers will take you on regardless of your credit score. To compensate for their increased risk, online lenders may charge higher interest rates and have additional hidden charges bundled into their loans. Think about your situation and decide what is best. You will need to decide whether to improve your credit score by borrowing from higher-quality institutions or if you want to take out a loan from less-reputable sources and pay more later. It’s up to you to make the decision. No matter what choice you make, ensure it is financially sound.
It can be easy to get truck financing. Your dream truck is within reach if you are willing to shop around and do a little bit of number crunching. Apply for call: (571) 544-6600.