Can I Buy a Semi with Bad Credit?

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Having bad credit can feel like an albatross. But you don’t have to deal with that weight alone. We specialize in repairing bad and broken credit and allowing people to get back to living their lives the way that they want.

Owning and operating one’s own business is a goal that millions share. There are many different avenues to take to achieve this dream and to make it a reality. What avenue that winds up being is up to that person, their goals, and their skills.

But one of the best ways of branching out and running your own business is to purchase a semi-truck. Owning your own truck can actually be the beginning of a very successful, lucrative career with more flexibility and the opportunity to be your own boss.

That also means that you need to purchase a semi-truck. Much like purchasing a car, truck or SUV, your ability to purchase a semi-truck can be impacted by a bad credit score. Having a bad credit score can have a major impact on things such as credit cards, mortgage loans, and, yes, getting an auto loan.

Even if you have bad credit or a lack of financing, there are ways to get a semi-truck to begin your new venture. It will take a little bit of thought and a lot of planning to make that dream into a reality. The important thing to remember is that a bad credit score does not need to keep you from getting the things that you want.

Get Your Credit in Order First

Before beginning the process of purchasing a semi-truck, you need to know what your credit situation is. The first thing is that you should look into your score. There are three different credit bureaus that matter as well as FICO. Know what your scores are in all four.

Even if you know going into the process that your credit isn’t good, you can begin to take the appropriate actions right now to improve your scores. It is also important to know what goes into your credit score so you know where to make the appropriate changes.

Your credit score is impacted by several factors. The first is your payment history. This is impacted by late or missed payments and makes up the largest portion of your FICO score. Even making a few good payments in a row establishes a good payment history and that can be enough to swing things into good favor.

Your credit utilization is also important. This is the amount of open credit that you have and how much of it you are spending. So, for instance, if you have $10,000 in available credit, you should be spending $3,000 or less of that to have a credit utilization in good standing. The higher that utilization, the worse off you will look in the eyes of creditors.

Your credit age, foreclosures, repossessions, bankruptcies, and any other negative marks will also count heavily against your score. It is important that you keep your accounts current and that, should you fall behind, you talk to your creditors. They may be willing to make changes to your monthly payments so that they are more manageable.

What Bad Credit Means

Having bad credit when trying to purchase a semi-truck can mean a couple of different things. If your score is bad enough, it may completely prevent you from getting approved for a loan. You can circumvent this need by paying for the truck outright, but not everyone has that kind of capital available up front.

Even if you are able to obtain financing, there could be caveats. Some lenders may not be willing to lend you the amount that you will need to purchase the truck. This can leave you in need of additional financing, essentially putting you in the same position that you started in.

You may also need to put a much higher down payment down to obtain your financing. This requires more capital up front and that can be an issue for some borrowers. The higher down payment is meant to mitigate potential risks for the lender, but present an issue for the borrower.

Since commercial truck financing is so dependent on your buying power, those with lower credit scores may have a reduced option when it comes to inventory. This could severely hamper your goal of not only getting your own truck, but what you can use it for.

There are also interest rates to be aware of. Borrowers with bad credit are often able to obtain financing, but that financing comes with some of the highest interest rates on the market at that time. That means that you will spend longer paying off your loan and will pay much more in interest than you would in other scenarios.

Take the steps to know what your credit history is and, if you can, make improvements to your credit before moving forward with your semi-truck purchase. It might not be fun to have to wait, but it could wind up being a smarter financial decision that could save you thousands of dollars in interest over the life of your loan.

Tips for Obtaining Financing for a Semi-Truck

Thankfully, there are steps that you can take to get the truck that you have been looking for. Again, it is much the same as obtaining a truck, car, or SUV in the way that the semi-truck is financed. Having said that, here are a few helpful tips that can help you land the financing that you need to get the truck you want.

Put More Money Down

It might not be the most practical or realistic step for those looking to buy a truck, but the quickest and most effective way to obtain financing at a reasonable rate is to put more money down up front. When applying for a commercial truck loan, every dollar that you are able to pay up front will bring you all the closer to getting your approval.

Lenders definitely like to see a good credit history, but they also like to see equity. The more money that you are able to put down on your truck, the more equity there will be on the truck.

It also means needing more money before you buy. With some planning and proper budgeting, you can have a good down payment saved up in just a few months. Also, take a good look at your budget. See where you can cut some things to enhance your amount saved in a much shorter time period.

Another good thing to consider about a higher down payment is that it means you will be borrowing less. The less you have to borrow, the better. It can help to get you a lower interest rate and will save you on those interest rates over the life of the loan.

Buy From a Dealer That Carries Their Own Papers

This is a bit different, but can be beneficial to your needs. There are dealers that will allow you to put money down up front and then make payments on a monthly basis in an agreement that is similar to lease-to-own agreements.

It also means that you will have to buy from their specific inventory. This can present more limited options, which may or may not be an issue depending on what you want and need out of your truck. Take a look at the inventory available if possible so that you aren’t left to make a decision on the spot.

This can also be beneficial because financing options are open to almost anyone no matter what their credit score is like. It might take a higher down payment, but you are more likely to get approved by a dealer that carries their own papers. Just weigh the risks and know what inventory is available before you make your decision.

Find a Co-Signer

Having a bad credit score can obviously hamper your ability to secure financing. Not only that, having a large down payment up front is not necessarily realistic for everyone. But that doesn’t have to be the end of the line in your financing goals.

Having a co-signer is another possibility. This is where you have a co-applicant who essentially vouches for your creditworthiness. For a co-signer, you will want someone with a good credit score to help raise your chances of obtaining financing at a good interest rate.

In addition to finding someone that has a strong credit score, you will want a co-signer that has a Commercial Driver’s License (CDL). You want that person to have a CDL because lenders won’t accept a borrower that uses anyone as a co-signer. So, if you planned on using your grandmother that lives in an elderly home as your co-signer, it won’t work.

The good news here is that if you are able to find a co-signer that has a great credit score and a CDL, you can almost guarantee that you will get approval from the vast majority of lenders.

Keep one major thing in mind: this person is vouching for your credit and they are now as responsible for your payments as you are. If you fall behind on your payments or stop making them at all, it not only has an impact on your credit history and score, but theirs as well.

Falling behind on payments or creating a negative payment history for yourself and the co-signer can lead to the end of that relationship. Keep all of these things in mind before you make a decision of implementing a co-signer. Most of all, be certain that you can make the payments on the semi-truck. Hurting your credit is bad enough, but destroying a relationship because of it can be the worst of scenarios.

Additional Collateral

If none of these are a reasonable option to pursue, there is one other course of action to take: additional collateral. There are some lenders that actually specialize in issuing semi-truck loans where additional collateral is accepted instead of equity.

This is a highly flexible option for obtaining financing for your semi-truck. It also shows you which lenders are willing to work with you to find a solution to your bad credit. It provides another route to financing and another route to living out your dream.

The caveat here is that you could lose that collateral if you fall behind or fail to make your payments. Keep this in mind before committing to that collateral as it would be awful to not only lose your truck and damage your credit, but lose that collateral as well.

Talk to the Dealer

This depends largely on the size of the dealer that you work with, but just be honest with them about your credit. We don’t all get to bad credit standing overnight and it is not necessarily indicative of bad decision-making.

Explain to them your situation. The worst they can do is say no and larger dealers may not have the flexibility to work with you. After explaining your situation, you can be pleasantly surprised to find that the dealer will work with you.

The key here is to explore every option. Having bad credit can severely limit those options and finding the route to financing at the best interest rates will take a little extra run around.

Things to Watch Out for

While it may seem like you have to bend over backward and take every concession to even obtain financing for your semi-truck, it doesn’t mean that you need to be taken advantage of. Sure, you will have to go through a few extra steps to get that financing, but there are things that you will want to keep an eye out for, too.

Be sure that you put at least 10% down before you ever drive the truck off the lot. Whether you are buying directly from the dealer or obtaining a loan, you will want to follow this rule of thumb. This will help to make the purchase much smoother when buying the truck.

Like any other contract that you will sign in your life, be certain that you read all of the fine print. Know who is holding the title to your semi-truck while you are making the payments to pay it off. Be sure that you know all of the details and that no stone is left unturned.

By not reading the fine print, you could wind up facing a nasty surprise like finding out that you never really owned the truck to begin with. This would be a disastrous position to find yourself in, especially if you put down a higher than normal down payment.

Lastly, work with a dealer that has a dealer’s license. You will no doubt find many independent sellers out there who will offer great prices and financing even if you have bad credit. Look into their history before making any kind of deal.

A registered dealer, meanwhile, is accountable for financing deals as well as their sales. You can feel better by going with a registered dealer and shouldn’t settle for anything less than that just because you have bad credit.

Exercise Patience

It is a good idea that if you want to purchase a semi-truck, you give yourself time and exercise a little bit of patience. That means not deciding to purchase a truck and looking for one on the same day. This is what leads to poor financial decisions that leave you in a bad situation.

Know what you want in terms of a truck. Know what you will need to achieve your business goals so that you can have a stronger understanding of what it will cost you to obtain that truck. Leave no guess work and no uncertainty because those uncertainties will only lead to potential issues when securing financing down the line.

It is also important to explore all of your options. Even knowing ahead of time that you have bad credit doesn’t mean that you can only qualify with one lender or at one rate. Explore your potential financing options and you may be surprised to find that you can land a better deal than you thought.

The entire process is about exercising patience and putting yourself in the best financial situation that you can. Sure, you want to be able to buy the semi-truck that will give you independence and allow you to begin your business. But at the same time, you want to be on the best financial footing that you possibly can be.

When you make decisions that put you in a less than optimal financial position, it can have an impact on your immediate future. Not only that, you could wind up agreeing to terms that you can’t actually afford. That can mean having your truck repossessed and damaging your credit even further than it was when you started.

Obtaining financing to purchase a semi-truck, thus beginning your foray as an independent business owner, is an interesting prospect. Just make sure that you take all of the precautions and check out all of the details before making a decision.

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