February 3

Truck Financing 101: How to Do It (Even If You Have Bad Credit)


You’ve been eyeing that truck for a while now. It’s big, beautiful, and everything you’ve ever wanted in a vehicle — until you saw the price tag, that is.

Now, price wouldn’t be a problem if you were Bill Gates or if you had a spanking clean credit history. But if you have a spotty track record as a borrower or you don’t have much cash under your belt, you’re going to have to work a little harder to get a truck loan. To get the biggest amount of money for the least amount of trouble, here’s what you can do.

1. Take a good look at your finances.

Most people shop for a truck before they shop for truck financing. We suggest you do it the other way around for the simple reason that truck prices are unlimited but your budget isn’t.

If you shop around without knowing how much you can afford first, you might be tempted to take the most expensive option right off the bat, thinking that price equals quality. But if you set a price range and you stick to that range no matter what, it’s easier to narrow down your options to the trucks that serve your needs and are easier on your bank account.

So what does “easy on your bank account” mean? To calculate the highest amount you can realistically afford to pay per month, you need to know:

  • Your monthly income before taxes. How much do you earn every month before taxes are deducted?
  • Your trade-in value. If you have a vehicle that you can swap for the truck at a dealership, how much will the dealer pay for it?

Assuming you haven’t taken out a loan yet, you can take the two values above, plug them into the appropriate fields in this car affordability calculator, set the other fields to zero, and presto! You’ll have a rough estimate of the price range within your reach if you’re able to pay in cash.

If you’re going to pay for your truck entirely via credit, we’ll get to that in a bit.

2. Get your business paperwork together.

If you’re buying a truck for personal use, you can skip this section. Otherwise, if the truck is for commercial or business use, you’ll have to submit proof of business paperwork. The “proof” depends on what type of business you have. For example:

  • If you have an old sole proprietorship/partnership (that is, your business has been running for at least a year), you can submit your IRS Schedule C as a sole proprietorship with at least one year of income or an IRS Schedule K-1 as a partnership.
  • If you run an LLC or corporation, you simply have to print out a record of your business from your state’s Secretary of State website. The lender can also double-check by looking up your record online.

Aside from proof of business, you might have to submit other documents to show that you have the ability and authority to pay off your loan. For example, if you’re an owner-operator, the lender might ask for a Commercial Driver’s License (CDL), U.S. Department of Transportation (USDOT) Number, and a Motor Carrier (MC) Number. Even if the lender doesn’t specifically ask for these, you never know when they might come in handy in the future.

3. Choose the truck you want to finance.

Lenders won’t just finance any truck. They’ll also look at whether it’s new or used, whether it’s a dump truck or a semi, and whether the truck is worth the loan they’ll be handing out. You can try to remember all of this or you can put yourself in the lender’s shoes: If you were them, would you finance the truck you have in mind?

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Of course, money shouldn’t be your only consideration. You should also look at the size of the truck, how much mileage it has (if it’s used), how fuel-efficient it is (since gas is a regular expense for any vehicle), and other features that’ll affect how you use it. For a better idea on what you’ll be shopping for, check out our post on the different types of trucks.      

4. Work out your down payment.

It’s hard to pin down an exact answer to “How much will my down payment be?” However, there are a few factors guaranteed to bump up your initial expenses.  

  • You’re a new business. New business owners don’t have consistent cash flows yet, so they’re considered credit risks.
  • You’re an owner-operator. Owner-operators usually own just one truck. If that one truck goes down, so does the owner-operator’s ability to pay off their loans.
  • You’re buying from a private party. Since private party transactions aren’t as structured and secure as dealer transactions, lenders find them harder to verify and therefore, riskier.
  • You’re buying an old truck. The older the vehicle, the more likely it is to break down and incur additional, unnecessary costs.
  • You have low cash reserves. Pretty self-explanatory.

Luckily, these factors can offset each other. For example, if you have a low credit score but your business has been going strong for at least 2 years, your down payment will be lower than that of a person who has poor credit and has been in business for less than a year. If you want an exact figure, read this guide on how big your down payment should be.  

5. Work out your monthly payments.

At this point, you already know:

  • The price — or price range — of the truck you want to buy.
  • The trade-in value of your existing vehicle (if applicable).
  • The amount you can afford to pay every month.
  • How much of a down payment you can afford.

Given these figures, how much will you pay every month?

The answer is… it depends. If you already have an interest rate and principal amount on hand, you can plug them into this truck financing calculator — along with the details above — and have a rough estimate of your monthly payments. In the event that the monthly payments are higher than what you can afford to pay, look for another loan with different terms.    

6. Find a good financing company.

The good news is that there are plenty of places where you can get a truck loan. For example, you can work with local banks, national banks, credit unions, online lenders, and dealers.

In general, the bigger the company, the stricter their lending requirements. If you have bad credit, you might find it difficult to borrow from places like banks and credit unions. But if your credit history is good, those places are pretty reliable sources for truck financing.

On the flip side, online lenders and dealers are more willing to take you on even if you have bad credit. However, these lenders also charge higher interest rates and have other hidden fees bundled into their loans to compensate for the added risk they take. In the end, you have to decide whether you should improve your credit score first to borrow from more prestigious institutions or take on a loan from seedier sources now and pay a higher price later.

Truck financing doesn’t have to be a headache. If you’re willing to shop around and don’t mind doing a little number crunching, your dream truck will be within reach.


borrowing, buying insurance, buying used cars, financing, lenders, trucks

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