Whether you’re deciding to become an independent owner-operator or starting a small trucking business, you need to purchase your own commercial truck (or trucks). Buying a truck upfront requires a lot of capital which is why most people finance them.

Financing a truck is relatively easy if you have good credit, but what if you don’t? Having bad credit doesn’t mean you can’t finance a semi-truck, but there are many more hurdles to get through.

Continue reading below to find out how to finance a truck with bad credit.

How Does Financing Work?

Financing a semi-truck is much different than a simple auto loan. Typically, car loan interest rates are below 5%, while commercial trucks can be up to 30%.

Lenders usually use the semi-truck itself as collateral, so if you can’t make payments, the lenders will seize the truck. That’s good news because that means you won’t need to put up other assets as collateral.

You can try to get financing through a semi-truck dealer, or you can shop around and get better rates from financial services or banks.

When shopping for a loan, lenders will always consider these three things:

• Credit score – having a score above 600 will get you the best rates
• How long you’ve been in business – the longer, the better
• What you can provide for a down payment

How to Finance a Truck With Bad Credit

Just because you have bad credit doesn’t mean you’re out of luck. Many lenders will still finance the truck (or trucks) you intend to buy.

The downside to financing on bad credit is that the interest rates will likely be much higher. However, there are ways to get a reasonable interest rate even on bad credit.

Find a Co-Signer

Do you know someone who has a CDL license and great credit? If so, that could be your ticket to a loan with a good interest rate.

However, you can’t co-sign with someone who doesn’t have a CDL, even if they have good credit.

Put a Large Down Payment

The more money you put into the down payment, the more likely a lender will accept you. The more money you put into the truck, the less risk for lenders.

Put up More Collateral

Some lenders will accept other forms of collateral in addition to the commercial truck. However, you’ll need to work with the lender to find something that will work for them.

Buy From a Dealer

Some dealers will allow you to make a down payment and then make a monthly payment until you own the commercial truck. This might be the best option for those with bad credit since the dealers will work with you to make a monthly plan.

However, the only downside is that you’re restricted to the trucks that the dealer has on the lot.

Get Trucking

Before signing any loan or financing plan, make sure to read the fine print. If you need to, send the documents to a lawyer or make sure you have all the details ironed out before you sign.

After that, you’ll be on the open road in your very own truck or getting your small business off the ground.