Need A Semi-Truck But Have Bad Credit? Here's What You'll Want To Know

Bad credit is a major issue that affects a broad swath of professional truckers. If you're among the many with less-than-stellar credit, then you're probably wondering if you'll be able to finance the used semi-truck you're looking for. Having bad credit isn't a major stumbling block when it comes to commercial semi truck financing, but there are a few things you should know before you decide to finance your used semi-truck purchase.

It Can Have a Major Impact on Your Truck Choice

Having bad credit may limit the amount you're able to finance for your used semi-truck. The typical asking price for a heavy-duty commercial truck ranges from $30,000 to $80,000, according to recent data from CostOwl. Of course, this depends on the mileage and overall condition of the truck, as well as the market it's being sold in.

With a poor credit score, your lender may be reluctant to preview for a large purchase amount. In some cases, you may end up having to lower your expectations or make some sort of compromise when it comes to your semi-truck choice.

You May Need a Larger Down Payment

When it comes to financing a commercial truck purchase with bad credit, you may find yourself paying more up front. Truckers with excellent credit routinely pay little to nothing upfront when purchasing their vehicles, while those with poor credit find themselves paying 25 percent or even 50 percent of the asking price upfront. For many lenders, requiring such steep down payments from truckers with bad credit makes sense. Having most of the truck paid for upfront reduces their risk, especially in the event of a loan default.

Your credit score isn't the only factor that could land you with a higher down payment. The age and mileage of the truck you're buying can also have an influence on your down payment. The older the truck and the more miles it has on the odometer, the higher your down payment will likely be.

You Could End Up With a Higher Interest Rate

In addition to paying a bigger down payment, you may end up being hit with higher interest rates. It's not unusual for commercial truck financing firms to charge truckers with poor credit scores higher amounts of interest than those with prime or near-prime credit scores. Again, it's simply how many financing firms hedge their bets when it comes to high-risk customers.

The Effects of Bad Credit Aren't Limited to Financing

Having bad credit can also play a significant role in making your insurance more expensive. Like commercial truck lenders, insurance companies often look at credit scores when assessing the overall risk of their customers. The lower your credit score, the more pronounced your potential risk becomes in the eyes of your insurer. As a result, you could find yourself paying higher monthly premiums.

Tips for Improving Your Credit

Having bad credit isn't something you're stuck with forever. With enough time and hard work, you can improve your credit score so you can qualify for better financing terms for your next semi-truck purchase. In the meantime, here are a few things you can do to improve your credit:

  • Refrain from reckless credit use. Irresponsible use of your credit can have a devastating effect on your credit history and score.
  • Always pay your loans on-time. Repaying your loans on a timely basis not only builds a good credit score, but it also builds excellent financial habits.
  • Don't fall into default or collections. Whether you default on a loan through nonpayment or have a company began collections efforts against you, these issues can significantly lower your credit score.
  • Check your credit score on a regular basis. It's always a good idea to keep an eye on your credit report and numerical score, as these can change regularly, for better or worse. It also gives you an opportunity to catch and correct mistakes that would otherwise drag your credit score down without your knowledge.