The way Box Truck financing works is quite different from the conventional vehicle financing system.
Unlike the latter, qualification for the Box Truck financing depends primarily on the credit score of the business owners, besides age of business and business revenue.
Basically, the Box Truck you are financing takes the form of collateral in box truck financing.
This is, understandably, a way for the lender to minimize risk on the box truck loan.
Limiting the risk this way, you stand a better chance of qualifying for truck financing and even box trucking leasing deals.
That said, many factors come into play in determining your box truck financing program, including the down payment, credit score, and interest rates.
In this article, you will be learning all about these and more as it relates to box truck financing. Some frequently asked questions will be answered, as well learn how to lease truck here!
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What is Bad Credit?
To put it succinctly, bad credit essentially describes a low credit score.
It refers to an individual’s poor history of defaulting on prompt bill payment, which, unfortunately, would be taken as an indication to fail to make timely monthly payments.
It results in a bad credit history. Bad credit typically refers to low credit scores.
Things like late payments or maxed-out credit cards can bring your scores down.
A few things that could help you improve your credit scores include developing a history of on-time payments and keeping your credit utilization low.
While this article may be discussing bad credit in terms of individual box truck financing, it should be noted that corporate entities can also have bad credit based on their payment history.
Anyone with no good credit score will find it extremely difficult to get financing options for their box truck.
And even when they do, it won’t be at competitive rates due to their notorious history.
How to Measure Your Credit Score
There are several models available for measuring credit scores, but we will dial it down to only FICO AND VantageScore in this article.
They both operate on a scale of 300 to 850, but they have varying bad credit ranges as you will no doubt see in the following paragraphs.
Note: Every lending outfit, including credit unions, reserves the right to define what bad credit means to them and set their minimum credit score requirements accordingly.
FICO score ranges
FICO has a score range of 300 – 850, and each sub-range means something regarding your credit status.
300 – 579. This is the lowest range on the scale and it, quite simply, means Very Poor credit scores.
If you fall in this category, there is a high chance that your credit application will fall through.
And in the unlikely event that it does, it won’t be on favorable terms as you would be required to make considerably larger deposits and fees.
About 16 % of Americans fall in this category.
580 – 669. Generally known as Fair credit scores, they are a step higher.
Credit applicants that fall within this range are called subprime borrowers and may still meet roadblocks during financing applications. 17 % of Americans fall under this group.
670 – 739. This number means a Good credit score. While people with scores as high as this generally tend to have a really low default rate, about 8 % still grow to become gross delinquents. This range represents 21 % of Americans.
740 – 799. If you fall in this range, it means you have a Very Good credit score like 25 % of other Americans.
This translates to enjoying better average interest rates from lenders and other financial institutions. This category has the highest number of people.
800 – 850. This is the very top of the scale and means you have an Exceptional credit score.
Once you attain this status, you enjoy perks, including the best rates from the right lenders and credit outfits. 21 % of people fall here.
Like FICO, VantageScore is another scoring model. It was designed by Experian, TransUnion, and Equifax (the three major credit bureaus) and the scale also ranges from 300 to 850.
The scale is broken down as follows:
||300 – 499||Very Poor|
||500 – 600||Poor|
||601 – 660||Fair|
||661 – 780||Good|
||781 – 850||Excellent|
Factors that determine your credit score
The only solution to bad credit is improving your score.
But before you can even achieve that, you must know the things that either affect or determine your credit score in the first place.
They are listed thus:
This simply describes a record that shows if you have bothered to make any payment at all.
And if you have, were they on time or late. Good payment history will give you a good credit score and put you on favorable terms with lenders and credit unions.
Credit utilization rate (CUR)
Also known as your credit utilization ratio, the credit utilization rate describes the amount of credit you are currently utilizing (how much you owe at the moment) divided by the total available credit (credit limit).
In other words, CUR is how much credit in your credit cards you are using. It’s typically expressed as a percentage. A healthy CUR has to be low, usually not more than 30%.
This comprises the amount, type, and age of the accounts.
Irrespective of the type of loan or type of financing, a direct lender that wants to assist in your box truck financing would want to be able to see some diversity on your credit report.
A decent combination of a mortgage and credit cards will go far in helping you score.
Note: opening too many credit accounts within a short time as well as taking too many loans all within a short period (2 years) can reduce your credit score.
Total debt owed
This simply refers to every single penny you owe in all types of loans as well as the ones you have racked on your cards (never max out your credit cards).
If it’s too much, it can affect your credit score and expose you to higher interest rates.
Hard credit inquiries
This describes the process a lender has requested your credit information. This simple act will pull down your score as they follow your credit report for a really long time.
Other factors would include bankruptcies, child support due, and other matters of public records. Don’t be found wanting in any of these areas if you want to keep a good credit record.
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Cons of bad credit
If you have read up to this point, you probably already know that the higher your credit score, the better.
The higher your chance of qualifying for credit and at favorable terms and rates.
If your credit score is, however, low, it can become rocket science to reach a favorable loan agreement or get favorable credit
A bad credit score can expose you to these limitations:
- Higher insurance premiums. Vehicle insurance companies, as an example, utilize your credit report information in combination with other data to investigate your claim. This is notably in some states.
- Potential credit application rejection. This goes as far as all loans (including a commercial truck loan) and lines of credit.
Bad credit loans
Try as everyone may, not everyone will have a commendable credit report or meet the basic credit requirements.
Some first-time buyers, as you already may have guessed, have no credit history whatsoever.
Even these groups of people here will still need to get a loan to meet cash flow needs. And that’s where bad credit loans come in.
Bad credit loans are loans lenders offer to individuals with less-than-perfect credit scores or without credit reports.
Naturally, these loans carry with them more restrictions and higher interest rates. The reason for it is simple, it’s a way for lenders to hedge their risk of you not paying back.
How to choose a good bad credit loan company
When it comes to loan companies, there’s no single best one to suit the box truck financing needs of everyone.
It’s a different-strokes-for-different-folks situation. But there are a few factors that can help guide you to your best option.
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- Eligibility requirements
Even for a bad credit loan, you still have to be eligible. In most cases, the eligibility requirement will be listed on the lender’s website during your online application.
It will feature parameters like:
- minimum credit scores.
- minimum income levels.
- maximum debt-to-income ratios.
Clearly, you should only apply to the ones you are eligible for.
Fees and interest rates
Different lending outfits use different yardsticks to determine your interest rate. Get quotes from a few lenders and compare fees and interest rates.
There are different repayment terms available, but it’s typically anywhere from 1 to 12 years.
You have to decide which one you want, short or long repayment period.
While the former demands lower overall interest and takes you out of debt sooner, the latter lessens your monthly payment burden.
Type of lender
They range from online lenders to banks and credit unions. They all have their pros and cons. Do your due diligence before you settle for any one.
How to finance a box truck with bad credit
Let’s say you’ve been eyeing that fine, new truck at a leasing company in your township and you just know you have got to cop it for your delivery truck business.
Then they show you their lease term and layout the lease payment plan and you realize you need a commercial vehicle loan to finance it.
With a spotless credit history, you are home-free. However, if you come short, you’ve got your work cut out for you.
But it’s doable. View review of IdeaLease progrsm here!
The following are steps that you can take to claim any of your light-duty trucks or any other truck for that matter.
- Work with what you have
Start by taking a good look at the state of your finances and see which is the best financing program for you. Do this before you even start shopping for box trucks.
Note: Understand that personal truck financing will differ from commercial fleet financing.
- Ensure your paperwork is in order
This is especially important for commercial box truck financing, not so much for personal use trucks.
You will be required to submit proof of business paperwork as well as papers to show your ability and credibility to offset the loan when the time comes.
- Choose the box truck
You have to be mindful of the truck you pick for financing as lenders don’t just hand out loans for just any truck. They have to be convinced that the truck is worth the loan.
- Sort out your down payment
You know by now that there is no exact answer to this question as it depends largely on the lender.
Given your bad credit history, expect it to be on the high side. Fetching from the number one on this list, you should be able to work out some type of deal.
FAQ about Leasing Box Trucking Business!
What is considered a bad credit score?
Within the confines of this article, we have highlighted two credit-scoring models; FICO and VantageScore and they both pack a scale of 300 to 850. Any credit score below 600 is considered poor or bad.
300 – 579: Very Poor
580 – 669: Fair
670 – 739: Good
740 – 799: Very Good
800 – 850: Exceptional
300 – 499: Very Poor
500 – 600: Poor
601 – 660: Fair
661 – 780: Good
781 – 850: Excellent
Why are bad credit loans the best for people with poor credit scores?
As the name rightly implies, bad credit loans are designed to serve individuals with bad credit, that is to say, people with poor credit scores.
To put it clearly, it’s the only type of loan that people who have poor credit history will likely qualify for because the approval process is relaxed.
Box truck financing is necessary if you want to get one with limited personal funds.
But you need a good credit score to get the best out of it.
But if what you have is a poor credit score or no credit at all, this article has highlighted steps that can assist you.