Zero Down Commercial Truck Financing-Is it Possible?

Published September 12, 2020 by WC Team

Are you looking to purchase a semi-financed truck? Well, even in that case, you will need to pay a certain amount as a down payment. What if you get an option of zero down commercial truck financing? You will get all the funds you need without having to make any initial payment!

Buying one or several new commercial trucks can be expensive for small as well as large businesses. So why not procure a loan from one of the trusted financial institutions? Some do not require you to pay even the down payment. Sounds interesting?

Read on to know more about what zero down commercial truck financing is and how you can obtain it.

What is Zero Down Commercial Truck Financing?

In simple words, you can call it obtaining the asset for your business without paying anything now. You can let a finance company make your truck's entire payment while you agree to repay in installments.

Do you think zero down commercial truck financing is that easy? Most of the banks and financial services do not entertain such loans. Some institutions may still agree to offer you zero down payment loan for your commercial truck under certain conditions. 

While you can acquire the truck without an upfront payment, the lender will charge high-interest rates. The usual rates for commercial truck financing may range from 3% to 10%. If you choose to opt away from the down payment, lending institutions may charge interest of around 10% to 15%.

Are you baffled with the rates? Well, it is natural. However, some ways could help ease your loan procurement process even without upfront payment.

5 Ways to Get Zero Down Commercial Truck Financing

1. Improve Your Credit Score

It is a crucial factor when it comes to procuring loans. Moreover, most commercial truck financing is considered risky by most banks and non-banking financial companies (NBFC). A credit score of around 600 is considered good for procuring a commercial truck loan.

In a normal situation, you will have to make a down payment. If your score is around 550-650, the lender may not require an upfront cost but will charge high-interest rates. You will need to pay large installments every month (or quarter) until the loan is closed.

For zero down commercial truck financing, you will have to convince the lender to waive the down payment. That is, without raising the interest rates. Though difficult, it is possible if you boost your credit score.

Clearing your debts, paying-off your credit card balances, making timely bill payments, etc. can help you upgrade your credit score.

2. Provide a Leverage

In most of the cases, the truck itself acts as leverage or collateral during commercial financing. The lender is satisfied that your truck will be seized to cover the balance if you cannot pay the installations. 

If you offer other business assets as collateral, you may convince the lender about your commitment. Additionally, previous financial statements and revenue credentials will portray the strong financial background of the business.

Apart from offering additional collateral, your past relationship with the financial institution may support your loan. If you have previously paid timely debts to the same lender, then the trust factor will likely be high. In such cases, the lender might agree to zero down payment.

3. Consider Getting a Cosigner

Banks and NBFCs do not usually agree on granting a loan with zero down payment. That, too, without increasing the interest rate. However, you may have a way out. If you get a cosigner with a high credit score, the lender may agree to finance your commercial truck fully.

A cosigner is a person who takes the guarantee that you will repay the loan on time. Here, the cosigner’s credibility is taken into consideration before the lender agrees to finance your truck. Additionally, the cosigner will be held responsible if you fail to follow the norms.

In some cases, the financial service requires your cosigner to come from the same business, i.e., truck owner or driver. You must consider getting someone from the same line. Furthermore, once your truck has been financed, make sure you maintain your cosigner’s credibility.

4. Do Your Research

Most of the finance providers may decline your request to get zero down commercial truck financing. However, that should not dishearten you. The good news is that there are still some trustworthy services that provide zero down payment loans.

You must shop around and weigh all your options. Research on the internet, visit multiple services such as banks, NBFCs, credit unions, online financial services, etc. Further, you must consider the rates extended by the various providers before choosing the final one.

Several lenders may offer very high rates if they think that you lack knowledge about the same. Do your homework about learning the prevailing rates and read the services' conditions before agreeing. 

5. Give Thought to Waiting and Saving Up

You must weigh out your options before deciding to go for zero down commercial truck financing. In most cases, you can only bag a zero down payment deal if you agree to high-interest rates.

Choosing to pay extra just because you cannot afford the upfront money may not be a profitable option. After a few years, your truck is likely to depreciate. You may be left bankrupt even after re-selling. It may happen if the leftover loan is higher than the vehicle’s resale value.

What’s more? The down payment value may not be as high as you expect. Several financial services require around 10% to 15% of the truck price as the upfront money. This way is recommended as paying a small initial amount is better than large installments.

Wrap Up

Yes, zero down commercial truck financing is possible, but it comes with sky-rocketing interest rates. You can save yourself from large installments by boosting your good credit score. Additionally, you can consider getting a cosigner or offering extra leverage to the lender.

Despite all of these, there are chances that the lender does not agree to no down payment policy. As a last resort or otherwise, it may be beneficial for you to wait and save some money. Down payments are not large, and choosing this option is better.

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