Did you know that there are over 500,000 trucking companies that are located in the United States? If you own a trucking company, then you need to be familiar with big rig lending, and its benefits.
More than 15.2 million trucks are on the road, and more than 2 million of these trucks are tractor-trailers. Are you an owner-operator or the owner of a trucking company with several big rigs? Learning about the best options for big rig lending can help you stabilize your business and grow your trucking company.
That’s why today, we’ve created this complete guide to help you get a better understanding of how truck financing works. Keep reading to learn more!
How Does Big Rig Lending Work?
Financing for a big rig usually involves a business owner using the truck that they’re investing in as collateral for the loan. Providing collateral for the lender will significantly reduce the risk that a lender faces when providing your company with the loan. In turn, providing collateral to a lender will greatly improve your chances of securing a big rig loan.
The way that commercial truck financing works is very similar to when you purchase a car. The lender of the loan will hold your big rig title until the total debt has been paid off. If there was ever a situation where you were unable to meet the obligations listed for your loan, the lender could seize your truck.
Are Special Loan Terms Involved with Big Rig Lending?
In most instances, commercial truck loans will have a loan term for an average of 5 years. The interest rate that you’ll find for a commercial truck loan can vary. One of the most important factors of commercial truck loans is the interest rate which is dependent on your credit score.
If your business doesn’t have any credit problems, you should secure an interest rate of around 5%. Some common credit problems include missed payments, debt going into collections, IRS liens, and other delinquencies.
Another situation that you may not have expected to run into is if your business doesn’t have a lot of financial history. You may be required to provide a personal guarantee or other types of financial statements. This will happen when you’re going to apply for your commercial trucking loan.
What’s the Difference Between a Loan vs Lease for a Commercial Truck?
Investing in a commercial truck loan will provide you with full ownership of the vehicle after paying off the loan’s full amount. When leasing a commercial truck, you’ll purchase the truck at the rate of the remaining value. The total amount you’ll purchase the truck for will be after depreciation has been calculated when the lease is terminated.
Using a commercial trucking lease may provide you with lower monthly payments when compared to other available financing options. However, you may end up paying more out-of-pocket for a commercial trucking lease then you would be with a loan.
There are some benefits that come with leasing a commercial truck, such as:
- You can trade in an upgrade your commercial vehicle at a later date
- Some leasing companies will provide your truck with maintenance
- If you have bad credit, you may not be eligible for a commercial trucking loan
- You may not have to put down as large of a down payment in comparison to a commercial trucking loan
However, if you’re interested in building a fleet of trucks or growing your business, taking out a commercial trucking loan would be much more beneficial. Plus, a commercial trucking loan will allow you to build a financial history for your business. This will help you out in the future if you are ever faced with a situation where you need business funding.
How Do You Find Big Rig Lenders?
When you’re applying for commercial truck financing, there are several red flags that you should be aware of to avoid scams.
When applying to different lenders, you should be mindful of not being required to provide any type of payment before you receive approval. This also means that you shouldn’t pay any application fees or any other type of upfront cash before applying for a loan.
You should also have the option to pay off your loan early without being penalized with any prepayment penalties. This is especially important if you were to be in a situation where you suffer a loss of insurance or if you need to trade in your truck prematurely.
Lastly, you should make sure that you’re not working with a company that charges you double the sales tax. If you’re taking out a loan and you’re ready to pay off the loan early, make sure that your sales tax is being charged in your monthly payments.
Working with a credible lender that has experience with providing loans for commercial trucking is imperative. Make sure to read reviews posted online to ensure that you are working with a reputable big rig lender. Always be sure to read over your loan agreement before signing any papers with your big rig lender.
Keep On Trucking and Find the Best Big Rig Lending Options Near You
By taking the time to do your research, you’ll be able to find the best big rig lending options near you. Taking out a commercial trucking loan will help you grow your current fleet of trucks or expand upon the services you’re able to provide to your current customers.
Are you ready to apply for a loan for your trucking company? We’re here to help you and your business every step of the way. Click here to apply now and keep on trucking!