Factors That Make You Eligible For Low Commercial Truck Financing Interest Rates

Published September 16, 2020 by WC Team

Factors That Make You Eligible For Low Commercial Truck Financing Interest Rates

A commercial truck can be a big investment. Unless you have a large reserve of cash to draw on, it can turn into a financial burden. With businesses both big and small primarily using commercial trucks to transport their goods to their end customers, the demand for financing of commercial trucks is constantly growing.

Typically stretched out over a period of a few years, these loans can be paid back in weekly or monthly installments, depending on the duration of your loan. Since the truck itself serves as the collateral, there is no need to put up any additional assets as security. 

But one can always use a bit more affordable commercial truck financing interest rates. There are a few criteria that can get you lower rates if you meet them. 

Eligibility Criteria For Low Commercial Truck Financing Interest Rates

You may acquire your funding from your car dealer, bank, or lenders specializing in commercial vehicle financing. While it can seem like a daunting task as the process is very different from getting a regular car loan. 

Keeping the following factors in mind can help you negotiate terms and secure lower commercial truck financing interest rates. 

Credit Score

The first and foremost criterion to be eligible for any loan, your credit score is instrumental in deciding the interest rates. A good credit score will not make it easier for you to get a loan; it will also raise the chances of you being offered lower interest rates.

Lenders may still provide funding for commercial vehicles to businesses with a poor credit score if your application is strong enough, but the interest rates will be significantly higher.

Credit History

Lenders offer the best commercial truck financing interest rates to borrowers with a strong credit history and good financial responsibility. Therefore, it is advisable to review your credit report before applying for a loan. Both your personal as well as business credit history will be scrutinized by lenders to look out for derogatory marks that may affect your ability to qualify for lower interest rates.

Make sure there are no recent events such as tax liens, vehicle repossessions, or delinquencies in your credit report. If, however, such events do occur in your report, you should take necessary action to resolve them before applying for funding. 

Application Fee And Down Payment

Depending on the lender you choose, you might most likely be required to pay an application fee or down payment as a part of the application process. The amount payable is usually a percentage of the vehicle’s cost. A higher down payment will increase your chances of securing a loan and put you in a better position in negotiating lower interest rates. 

Financial Status

In addition to providing a down payment, you also need to convince lenders that you are capable of making your loan payments on time. You should also have enough working capital reserves to cover insurance and vehicle repair costs as well.

Therefore, you may be required to produce bank statements, profit and loss statements, and tax returns. Other business information such as licenses or articles of incorporation, as well as your USDOT number and federal motor carrier number, might be necessary if you plan to do interstate commerce.

Commercial truck financing interest rates you are eligible for also depends on your financial situation. Although you may get full coverage, most financiers will only cover a portion of the total cost of the truck. If your financial condition is found to be stable, lenders would not see you or your business as a risk and offer you more lenient terms. 

Time in Business

If your establishment has been in business for a while, with a good track record and a strong client base, you are deemed as a good investment. You can use this to your advantage to strengthen your application and get a better offer in terms of interest rates and payback duration.

Smaller and newer businesses that show rapid growth and substantial purchase orders from customers are also eligible for benefits. However, their options may be somewhat limited with traditional lenders. 

Information on the Truck

The type of truck you plan to purchase and what you plan to use it for is an integral part of risk assessment on the part of lenders. Some may even require the make and mileage information of the vehicle in question. Information about its age and condition is relevant in the case of a second-hand model.  

Trucks used for carrying heavy loads over long distances are subject to more wear and tear. They need more repairs, and a breakdown may affect your ability to meet payment deadlines. You can easily do away with these fears by providing a backup plan for such situations in your application. 

Including all relevant information like –

  • Usage status
  • Make
  • Model
  • Year of commission
  • Current mileage
  • Detailed condition report with a history of upgrades
  • Repairs or accidents
  • Warranties along with photos 

Choice of Vendor

A reputable professional auto dealer experienced in selling trucks will provide assurance to lenders about the condition of the truck they are investing in on your behalf. 

Needless to say, you will be able to get easier loans and better terms if you choose a well-established dealer as opposed to buying from a private seller.

Insurance 

Since the truck also serves as the collateral, it is in the best interest of lenders to ensure that it is not damaged or devalued. This brings us to another requisite for financing your commercial truck, which is to insure it against theft, accidents, and fires.

Including a good insurance plan in your application assures the lender that the truck is financially protected from such unforeseen situations.

In Conclusion

A strong application, including solid information that assures lenders that investing in it will be a wise decision, will help you secure the financing best suited to your needs.

Foresight into what lenders are looking for will help you qualify for low commercial truck financing interest rates. Work thoroughly on the requirements, such as improving your credit score and providing backup plans for various scenarios.

Are you a business owner? Apply for financing. Start Now.

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