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How Affordable are Truck Loans?

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If you are in the market for a new truck then you may be considering a truck loan to help finance your purchase. However, there are many things that you will need to consider before you invest your hard earned money into your new investment. Here, we will breakdown everything you need to know about truck loans, as well as provide some effective tips that may help you save both money and time so that truck ownership can become a marked reality instead of a pipe dream.

How Affordable are Truck Loans?

Personal vs Commercial Truck Financing

If you plan on using your truck for commercial use then the equity and assets that are a part of your business will need to be reviewed by your prospective lender before they make a final decision on your application. Moreover, the conditions and terms of the loan in question will also be heavily influenced by the assets and equity that are part and parcel of your enterprise.

You may also have some trouble in securing financing if your company is a startup, as you will be seen as a bigger risk. The affordability of your truck loan may also be contingent on what your cash reserves are, as low cash reserves will make it harder to obtain a loan. In addition, lower cash reserves will likely result in higher interest rates if you are in fact approved, which will increase the overall cost of your truck loan.

It should also be noted that trying to obtain financing from a conventional lender for an older truck may prove to be more difficult, and that the truck you wish to obtain or use will be used as a form of collateral by your lender.

As for credit history, your credit history will have quite a bit of weight in determining whether or not you qualify for a personal loan, but will have less impact if you are interested in acquiring a commercial loan. However, your credit history will have a marked influence on the final interest rate of your truck loan as well as what your monthly payment will be.

In regards to your cash assets, they will also play a significant role in the terms and conditions of your truck loan, and will also have an effect on the down payment that you will need for your truck.

Hence, the number of cash assets at your disposal as well as how many years you have been in business for will influence the down payment that you will need to place in order to obtain your truck loan; with the number ranging from 0% to 15% for a conventional commercial truck loan.

Determining What You Can Afford

Before you decide if you want to finance a truck you will need to determine exactly how much you can afford to realistically pay for it. For instance, many financial experts agree that the monthly cost of your truck loan payment should not exceed the 20% mark of your monthly income.

It should also be noted that a typical truck loan term will last 60 months, which amounts to 5 years, so your income will need to be stable and your job security must be impeccable before you decide if you can realistically afford to take out a truck loan.

If you are still having trouble determining if you can possibly afford to buy a truck then you should tally your total assets and try and set aside a set amount in order to make a down payment for the truck that you want.

You should also look into what your net income per month is, as well as calculate total monthly expenses. Then, simply subtract the total monthly expense amount from your income in order to determine how much money is left over in order to make monthly payments on your truck.

Next, multiply the figure that you have calculated by the number of months that you will need in order to pay off your truck loan. Also, remember to use the cash assets that you have allocated in order to make a down payment, and if possible, try to put down a bigger down payment amount.

This is because placing a bigger down payment will help you gain leverage when it comes time to negotiate the specific terms and conditions of your truck loan. Qualifying for financing will also be significantly impacted by the amount you set aside, with a larger amount generally yielding better odds for qualification.

Questions to Ask Your Lender

Knowing what you are getting yourself into will help determine whether or not you can afford to take out a truck loan. To help you realize your goal of truck ownership you should ask your lender how long the borrowing term will be. This is because a longer term loan will equate to lower monthly payments, which may make it more affordable and more manageable for you to make monthly payments.

However, it should also be noted that a longer term will also tend to mean that your interest payments will also be higher. As previously mentioned, the typical lifespan of a loan for a new truck will amount to 5 years, with that number subject to change depending on the down payment that you place on the truck.

Furthermore, if you opt to buy a used truck then you may find that most lenders on the market will be hesitant to offer terms exceeding 36 months (3 years), as the collateral value of pre-owned trucks tend to be less inherent.

In addition, you should ask your prospective lender what the interest rate will be for your loan, as well as whether the interest rate is variable or fixed, as the total borrowing costs may vary greatly depending on the type of interest rate provided.

If you would like to obtain an affordable truck loan in order to acquire a new or pre-owned truck then please visit our website, or give us a call at 1-866-230-0094.

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