How to Get Commercial Vehicle Loans

If you're beginning a career as an owner or operator, odds are you'll require financing to get your business off the ground. There are several things you must do in order to get a commercial vehicle loan, and you can save yourself time delays and headaches by preparing in advance.

Instructions

Difficulty: Moderately Challenging

1. Get your finances in order by creating a workable budget that includes a payment for a commercial vehicle loan. Even though your income will increase once you become an owner or operator, loan officers don't consider potential income as much as they examine current income. You must be able to show that you could make the payments in your current financial situation.
2. Write a business plan. The information will give both you and your creditors a better financial picture of your potential business. Do your research carefully and use conservative figures to account for downtime and unexpected repairs.
3. Obtain a lease agreement from the carrier you plan to lease your equipment with. In most cases, the lender will require this information. Even if they don't ask for it, providing a copy shows you've done the legwork to put the commercial vehicle to work. Submit a copy along with your loan application.
4. Choose a specific vehicle and bring pictures and all of its information with you. Your bank will want to run the VIN number for title clarification and repair history. In addition, they'll do a value estimate based on mileage, condition and the current market.
5. Bring copies of your commercial driver's license and medical card, current pay stubs and tax returns for the past three years to the application interview. If there are payment gaps in your credit history, be prepared to explain both the reason for the occurrence and why they are no longer a problem.
6. Prepare to offer loan collateral. Banks are sometimes unwilling to use the vehicle itself as collateral for the loan, particularly if it has high mileage. Unless your credit is stellar, an unsecured loan may not be possible, and your financial institution may demand either a co-signer or additional collateral to seal the deal.

Tips & Warnings

• Shop around banks and credit unions to find the most advantageous loan terms. A small difference in interest can save you hundreds—or even thousands—of dollars over the life of the loan.
• Avoid finance companies and lease-to-own programs for funding. Both are notorious for high interest rates and excessive service charges. You will pay less in the long run by working with a traditional lender for financing.
• Never sign a lease-to-own program offered by your carrier. It's a conflict of interest for your carrier to have control over your dispatch (and therefore your income) while holding a financial interest in your equipment. If the carrier chooses to limit your dispatch, you'll be unable to make your payments. The carrier can then repossess the equipment and keep the lease payments you've already invested. Several big name companies in the industry have been involved in this practice. Search for class-action suits to learn more. In the meantime, save yourself financial misery and buy your equipment elsewhere.