5 Factors Affecting your Truck Loan

Commercial vehicles is an attractive business to be in. Once you succeed, the profit margins can be significant. However, it requires a hefty investment in the initial stages, as trucks and trailers come at an expensive price. A truck loan can effectively resolve this situation by providing you the required funds.

Before you approach a lender for a truck loan, it is a good idea to understand the factors that may impact the approval of your loan application. This will help you in preparing for the loan process. Let’s take a look at these factors.

Credit Score

A good credit rating is essential for an easy and smooth loan process. Besides, you may even get the loan at a cheaper interest rate if your credit score is positive. A credit report contains information about your previous debts and your history of payments. It also contains information about defaults, dues and late payments. Lenders run a check on the credit score to understand the level of risk associated with the borrower. You can access your credit report to understand your rating. The good news is that you can improve your credit score by paying your dues regularly and on time.

Loan amount

Lenders may not be willing to extend an exorbitant loan amount as it increases their risk. You can resolve this situation by giving a higher down payment. This will not only make the lenders happy, but will also reduce the interest charges you pay in the long term.

Tenure of the loan

A longer loan tenure may mean lesser EMIs for you, but it increases the risk on the part of lenders. If the borrower were to default, it would result in a higher loss. A shorter loan tenure, on the other hand, may mean higher payments for you. However, you may get a loan with more favorable terms and conditions.

Age of the truck

You may get a desirable interest rate if you buy a new truck instead of a used one. It may seem confusing at first. However, if you look from the lender’s perspective, you will understand the reason behind it. Vehicles are depreciating assets and lose value as soon as a customer buys them. In case of a default, the bank would get a higher resale value from a new truck.

Your debt to income ratio

This is another significant criterion that lenders consider before extending a truck loan. They observe the total debt that you have taken and assess it against your total income. This little exercise gives them an idea about your loan repayment capabilities. For instance, if you have a high amount of debt, they may hesitate to give you a truck loan even if your income is high.

Royal Trucks and Trailers Sales Ltd. is based in Brampton, ON and specializes in high-quality pre-owned trucks and trailers. If you are looking for a used Volvo for sale in Brampton, you can connect with us at royaltrucksales.com. Through our close associations with lenders, we can also assist with a truck lease in Brampton.