Whether you’re living in the country, expanding your business, or building a house, a reliable truck can be a great asset for many reasons. Although you might pay a bit more in terms of the price, maintenance, fuel, and insurance, it’s hard to beat the durability, cargo space, and carrying capacity that many trucks offer.
The only problem is that financing or leasing a truck can be tricky and expensive if you have a bad credit score of 600 or under. Don’t worry, if you know where to look, you can find plenty of dealerships and alternative lenders in Canada who can offer you a bad credit truck loan or lease agreement. Before you start searching, check out this advice.
What Types of Trucks Can You Get With Bad Credit Financing?
Before you start applying for a bad credit truck loan or lease agreement, you’ll have to figure out which kind of truck you want, how new you would like it to be, and how much it will cost you by the end of your repayment term. Unfortunately, some truck financing deals can be a bit more expensive if you have a bad credit score.
That said, if you do some research, you won’t have a problem finding a great source of bad credit truck financing in your area. In fact, with the right dealership or alternative lender, you can easily buy or lease any of these makes and models:
Makes (Not Limited To)
Models (Light, Medium & Heavy Duty)
- Tractor Unit
What Kinds of Bad Credit Truck Financing Are Available?
In Canada, you’ll generally come across two types of bad credit truck financing. Be sure to compare both options carefully as they have similar payment processes, but vastly different outcomes overall.
Bad Credit Truck Loans
A bad credit truck loan may be a preferable choice if you want to own the truck outright within a few years. Lenders who offer these types of loans will likely take into consideration your income (either personal or business), your expenses, as well as other debt obligations you may have. You could also consider in-house financing where the dealership you’re working with handle your loan. Either way, the eventual goal would be to have no liens on your vehicle and to be the outright owner.
You might also prefer a bad credit truck loan because:
- Buying or trading in trucks can be cheaper than consistently leasing them
- If you purchase the truck, you may be eligible for additional dealership benefits
- Owning the truck’s title means you can legally sell it or use it as collateral
- Unlike with a lease, you won’t have to try and keep the truck in tip-top shape
- Some lenders allow free or low-cost prepayments (early payments) so you can get out of debt quicker
Bad Credit Truck Leasing
If you would prefer to pay a dealership to try a truck out for an extended period, rather than buying it outright, a lease agreement might actually be the way to go. In fact, some leasing programs, known as lease-to-own agreements, even give you the option of purchasing the truck when your payment term ends. Otherwise, you would simply be renting the truck on a long-term basis, then returning it for a chance to finance a different make or model (or to move on to another dealership/vehicle entirely).
You might also find a bad credit truck lease appealing because:
- You can sample a variety of the latest makes and models over several years
- Some agreements/dealerships offer free repairs and general maintenance
- You may have more negotiating power than with a fixed truck loan term
- Leasing rates and terms can be more appealing than truck loan payments
- If you’re unsatisfied with your truck, you won’t have to sell or be stuck with it
What Are The Benefits of Bad Credit Truck Loans?
Decided to go for a bad credit truck loan in Canada? Before you actually apply, it’s a good idea to weigh the pros and cons of this type of financing. Let’s start with the benefits of bad credit truck loans, which include but aren’t limited to:
- Payment plans are generally flexible
- Alternative lenders can approve you faster than banks or credit unions
- Your credit score is less important during the approval process
- Applying with collateral or a co-signer may be an option (better conditions)
- Making full, timely loan payments can gradually improve your credit score
- You can make a down payment, also allowing for better conditions
What Are the Drawbacks of a Bad Credit Truck Loan?
Although there are plenty of benefits available, it’s equally essential to weigh the potential negative impact this kind of vehicle financing can have. For instance, if you’re not careful, you could experience the following bad credit truck loan drawbacks:
- Some lenders or dealerships charge higher interest rates and payments
- Lots of fees and penalties can apply (loan origination, late payments, etc.)
- There are many scammers out there who prey on consumers with bad credit
- Late, short, and missed payments can further damage your credit score
- Your cosigner could become responsible for your debt if you can’t afford it
- If you default, you may lose your collateral or get your truck repossessed
How Do I Qualify For a Bad Credit Truck Loan?
As mentioned, one major benefit of applying for a bad credit truck loan is that your credit score won’t be as much of an issue during the approval process. Essentially, what an alternative lender or bad-credit-friendly dealership really wants to know is that you can comfortably afford your loan payments, interest rate, and associated fees. As such, your income and available security will become more important.
That said, there are a few things you can do to get approved for a larger bad credit truck loan with a lower interest rate and a better payment plan, such as:
- Make a larger down payment: Some experts recommend that you put down at least 10-20% of the final asking price. Not only will a higher down payment make you a more creditworthy client, but it could also drastically reduce your final debt amount.
- Find a co-signer: Getting someone to co-sign your application can also greatly improve your approval chances and truck loan conditions, as long as they have healthy finances, a Commercial Driver’s License, and a clean driver’s history.
- Provide collateral: Many lenders can give you a secured truck loan if you offer up one of your assets (home, secondary vehicle, etc.) as collateral. The more valuable your collateral is, the more credit you can gain access to.
- Make a Trade-In: There are plenty of dealerships in Canada that will allow you to trade in your existing vehicle for a lower price on the truck you’re buying. While you probably won’t get what the vehicle is worth, this can also lower your debt.
Where Can I Get a Bad Credit Truck Loan?
Unfortunately, banks, credit unions, and other prime lenders have tougher approval standards for their potential clients. So, you may find it difficult to get a loan at one of these sources if you have bad credit. However, if you work hard and fill out your application properly, you may be able to find a favourable bad credit truck loan with:
When your bank turns you down, you can always apply with an alternative lender that specializes in clients who have bad credit. If approved, a lump sum of money will be deposited directly into your bank account. You would then use the loan to finance your truck, then repay what you owe via installments with interest, typically over several years (depending on how much you borrow). This might be a better option if you only need a smaller sum for a down payment or cheaper vehicle.
If you can’t find any good lenders or you’d prefer to simplify things by cutting out the middleman, find a dealership that offers their own in-house bad credit financing programs. You might even get lucky and come across a dealer that can give you a more affordable payment plan or a lower interest rate than some alternative lenders. Plus, if you negotiate a bit and agree to fully purchase the truck, the dealer may also throw in some extra perks, such as a better warranty or free maintenance and repairs.
Looking For a Bad Credit Truck Loan?
If so, you’re in the right place, because Loans Canada has the advice and the connections you need. Submit a request today to discover more information about the alternative lenders and bad-credit-friendly vehicle dealerships in your area. Remember, bad credit doesn’t mean you should be held back!