The trend for longer truck loans means that the buyer can qualify for a more extended financing period. Rising truck prices and buyers’ preferences for significant loan terms is an effective way of getting an affordable monthly payment. Although a lower truck payment might be appealing, it doesn’t have the best financial move. Because a longer loan will always result in higher financing rates and higher cost of purchase.
A Brief Introduction to Truck Financing
When looking for truck financing, you come across several options. Truck financing helps truck companies purchase trucks, and they provide them with lower rates than they get with traditional small loans.
Let’s dig a bit deeper and see how truck financing works and how long you can finance a truck.
Truck financing comes with three purposes:
- Leasing a new or used truck
- Purchasing a new truck
- Repairing a car that your business owns
Moreover, truck financing also comes in different forms, but often, truck loans are available as equipment financing. As equipment financing is specific for buying equipment, truck financing serves as collateral for the loan. The amount and the terms of this financing are related to the equipment’s cost and life period.
Longer Truck Financing:
Longer truck loans have their place for some consumers, and this can be the best option to get on the road of your needed vehicle. When it comes to financing needs, you should know how long this loan will work and how much you can borrow for a truck. You can adjust the duration of the loan, interest rate, and payment of monthly installments.
Truck Financing Rates and Terms:
The terms and rates of truck financing will depend on different conditions, such as your qualifications, the lender you are working with, and the specific vehicle you need.
Generally, the lender who provides truck financing charges interest rates between 5% and 30%. These interest rates depend on the borrower’s creditworthiness, the business’s financial state, and the truck’s condition. Usually, these interest rates are fixed, which means that you have to pay the same amount every month. Interestingly, banks offer longer terms that can go up to 10 years compared to alternative lenders.
Furthermore, the interest rate for your truck loan will not tell you everything about the total cost. Truck financing companies usually charge fees, which can be a credit check or application form fee. Notably, these things can impact the cost of your loan. For this reason, the borrower should ask the moneylender about all the packages, including all fees.
If you are a perfect borrower, then truck loans can be up to 100% of the value of the truck you are buying. Hence, the lender will demand a down payment, and you will receive financing for 75% or 95% of the truck’s value.
Truck loans are available through banks or alternative lenders, as small banks don’t offer these types of loans. The repayment time can extend up to 10 years.
Unlike business car loans, the truck serves as collateral. Truck loans are risky because of the issues and expenses related to oil changes, maintenance, and repair. Therefore, the lenders often hesitate to offer the borrower these finances. Other risk factors can be:
- Having low credit
- Brand-new business
- Purchasing an old truck
Now, if I talk about the new lenders, they have a hard time getting approved for a loan; this is the lack of credit and income history. If a borrower has any of these risks, that will lead to a higher interest rate or a down payment that can extend from 10% to 50%.
Best Truck Financing
The best truck financing operates like an equipment financing loan that allows small business owners to finance their motor vehicles and maintain their cash flow. If a small or medium size business has strong credit, then the owner can find the best truck loans from large banks. The benefit of taking a loan from a bank is that they offer longer terms and lower interest rates than online lenders.
So let’s take a closer look at it. A bank alternate can save you if a business owner purchases or repairs his first truck loans and the credit is in the center to lower ranges. Because their interest rates are a little higher and return terms are shorter, a fun fact is that they give a speedy fund with a quick and straightforward application process.
To sum up all the discussion, we comment that finance for a new truck can last for ten years, so a wide range of borrowers will find that truck financing is a good option because that works with the average credit history. A friendly suggestion is first to find your truck, then compare all the lenders for the best rates for your business.