Bankruptcy, foreclosure, short sale, delinquency, repossession. These events and more give your credit a bad name, an issue that could ruin your truck loan application. Fortunately, there are commercial truck loans for borrowers with bad credit. And they are not necessarily bad loans either.
Bad Credit and Truck Loans
Your credit is deemed bad if it has been damaged owing to any of the events listed above, or you hardly have any payment history as an individual or operating history as a start-up company. But just how “bad” your credit is, is up to the lenders to decide.
That’s why before you jump to conclusions or make assumptions for the worse, check your credit reports first. They form the basis of your credit score, which helps lenders determine (i) whether they want to lend you money, (ii) what the terms will be, and (iii) what the rate will be. In certain cases, credit is used to determine how much more the payment on the loan should be rather than for qualifying purposes.
Given their role, you should review all information in your credit reports thoroughly, ensuring everything is up to date and correct. If there are any mistakes, report them without delay.
Bad Credit Truck Loans
See a bad credit truck loan as an opportunity to finance your truck purchase for now. Later on as you have worked on your credit and have built a solid financial history, you’d be able to refinance to lower your monthly payments.
Bad credit truck loans are often considered subprime basing primarily on the credit standing of the borrower. While subprime loans come with rates higher than prime rates, they can still be flexible in terms of down payments and collateral. It may be because subprime lenders are not exactly traditional financial institutions and specialize in loans for people with challenged credit.
For example, there are lenders that accept borrowers with credit scores of 600 or no score at all. Some of these lenders extend truck financing to borrowers who filed for bankruptcy, etc. »It’s best to hear it straight from lenders about their loan programs.»
Beware of “Bad” Loan Deals
Being in the “bad credit” category isn’t exactly a bad thing if you exercise due diligence in finding the loan that’s right for you. This includes shopping for lenders, getting pre-approved (this is another way to know your credit score) and compare rates. Who knows you might qualify for a loan better than you expected?
Shopping and comparing loans make even more sense to avoid loan features considered as “abuses in the auto finance market” by the Center for Responsible Lending. They include:
(i) the practice of some dealers to mark up the interest rate being offered by the bank leading to higher interest rates;
(ii) yo-yo scams whereby a borrower takes home the car only to be told that he/she should sign a new loan after the original loan fell through;
(iii) products such as warranties and insurance that are not necessary; and
(iv) certain dealers who offer financing to people with poor or no credit histories at higher rates.