Introduction

Canada's trucking industry is booming, with an estimated 324,000 truck drivers recorded in 2021. There’s no doubt that owning these heavy vehicles comes with a hefty price tag. Besides the initial cost, commercial trucks require significant funds for annual maintenance and repairs. 

One way to handle these costs is by applying for truck loans. But if your credit score is less than perfect, what options do you have?

Good news! You can still apply for a truck loan with a low credit score if you can provide a collateral.

There are also other factors to consider while applying for a truck loan. We’ll walk you through the basics and also share tips on how you can expedite the process. 

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Factors to consider while applying for a truck loan 

Securing commercial truck loans with a low credit score may require some effort, but it’s definitely possible. Here are some factors to consider while submitting your application.

1. Down payment for your truck loan

If you want to get a truck loan with a low credit score, you’ll need to put down a larger down payment upfront. The amount depends on the kind of loan you’re applying for. 

Typically, that's anywhere from 10% to 30% of what you're borrowing. For example, if you're taking out an $80,000 loan for a dump truck and you've got to put down 15%, that's $12,000 upfront.

As your truck loan gets bigger, so does the down payment. A higher down payment not only improves your approval odds but also reduces the interest rates. 

2. Your credit score

Before applying for a truck loan, you need to know where you stand financially, starting with your credit score. 

You can easily check your credit score online through free services like Equifax or by requesting a report from credit bureaus. Having a solid credit score is key when you're looking to finance a big rig. It shows lenders that you're reliable and capable of managing financial commitments.

If your score is in good shape, you're in a better position to apply for a truck loan without needing as much collateral.

Now, if your credit score isn't great, don't worry. There are still options available, though you may need to provide collateral to secure the loan, which we'll discuss next.

3. Collateral for secured loans 

If your credit score is below 600, providing collateral is often necessary to qualify for a truck loan. Fortunately, you can use the truck you are purchasing as collateral. When the loan is secured by the truck itself, lenders tend to be more flexible with the terms. This flexibility can benefit you by offering customizable repayment plans and potentially better interest rates based on your financial situation. 

However, it is crucial to understand the risk: if you are unable to keep up with the loan payments, your vehicle may be seized.

4. Finding the right financing fompany

When considering truck financing, banks are often the first choice due to potentially lower interest rates and longer loan terms. However, securing a truck loan from a bank can be challenging for those with less favorable credit scores. In such cases, alternative options like online lenders or specialized financing companies may be more accessible.

Online lenders offer easier application processes and more relaxed qualification criteria for loan approval. While their rates and terms may not match those of major banks, they provide a viable alternative option.

5. Own a home? Consider a home loan instead.

Home equity loans typically offer lower interest rates than personal loans and credit cards, along with longer repayment terms. If you own a home, you may be eligible for a variety of different financing products including secured personal loans and secured lines of credit. Not sure what’s right for you? Get a free consultation from a Lotly loan specialist today.

Tips for managing your truck loan application 

• Organize Your Financial Records – Before talking to a lender, gather your recent financial statements and make a short plan on how you'll use the trucking loan. You can also do a soft credit check to have your credit score available.
• Watch Out for Prepayment Penalties – A prepayment penalty is a fee charged by lenders if you pay off a loan early. It's meant to compensate them for the interest they would have earned if you had kept the loan for its full term. Look for a lender that doesn't charge these fees if you expect your new truck to earn you more money and you plan to pay off your loan ahead of time.‍
• Plan a Meeting – Schedule consultations with auto loan specialists to learn how you can improve your chances. You’d be surprised to see how much they can help.