Getting a car loan doesn't have to be a nightmare, even with bad credit.

Winning Tactics For How to Buy A Truck with Bad Credit

last updated December 21, 2018

Do you need a new pickup truck for your farm but have low credit ratings? The good news is that there several genuine credit lenders near you willing to help you achieve your dream. In fact, some allow you to buy brand new vehicles despite your credit status. So, sit tight because you’re going to learn how bad credit truck loans work.

How to Buy A Truck with Bad Credit

1. Can I get a truck loan with a credit score of 550?

Yes, you can. In fact, some lenders even allow customers with credit scores of 500 to apply for financing. You’ll basically come across two types of bad credit lenders. The first lot uses their own money to help you buy a new or used truck.

On the other hand, you might meet credit brokers. These websites collect your personal information then applies for a truck loan on your behalf. Once the loan gets approved, the broker marks up the interest rate. For instance, if the bank offers the truck loan at 6%, the broker will adjust it to 8 or 9%.

2. Can I get a truck with bad credit and no money down?

Truth is, it’s impossible to find a credit lender who’s willing to take on such a huge financial risk. However, you can still get a new or used truck without making a down payment by applying for a secured car loan. How does this work?

The bank or credit union agrees to finance your truck purchase in exchange for a collateral asset you own. For instance, your home’s title deed, stock certificates, or retirement benefits. One advantage of this approach is that you can get more affordable interest rates compared to inhouse financing.

3. Is it possible to Refinance truck loan bad credit?

The good news is that most auto lenders and truck dealerships offer refinancing options. Why do they offer this service? Because they want to make sure you can afford the truck. Even if it means having them extend your repayment period in order to fit your financial situation.

Suggested read: Trading in a car with a negative balance

4. 11 ways of purchasing a truck with low credit

1. Plan a clear budget

Taking on a loan is like planning a journey. The destination determines how much money you’re going to spend. Just like your destination, the loan principal determines how much money you’ll spend to own your new pickup or semi-trailer truck.

If you’re not sure how to do this, here’s a simple tip to help you determine whether you can afford a truck or not. Take the monthly payment and multiply it by 12 so that you have the annual amount. If the figure is below 50% of your annual income, then you can go ahead and buy the truck.

2. Download your credit report

Did you know that credit lenders don’t refund your application fees if you don’t meet the requirements for financing? Your auto finance lender or bank expects you to download the credit report and confirm whether it meets the minimum limit.

After downloading your credit report from FICO, check the details on your previous loan. This helps you to notice any unreported monthly payments. If there are, raise the issue with your creditor so that your credit score improves.

Smart debtors download their credit reports on a monthly basis in order to keep track of whether credit lenders update their credit accounts on time.

3. Consider add-ons you want to purchase

If you’re looking for a truck that matches your everyday needs, then it most likely needs extra accessories to get the job done. For instance, you might need steel towing equipment for your pickup truck to transport heavy farm equipment. In addition, a set of fog lights is necessary to enhance visibility in bad weather.

It’s almost impossible to find a dealer who sells you a new truck with this equipment because auto manufacturers want you to spend more money on accessories. So, to avoid unpleasant surprises at the dealership, save some extra money for such expenses.

4. Look at the recurring monthly expenses

Ordinary buyers only look at the truck’s sticker price when making purchasing decisions. However, smart customers take a step back to look at what it costs to own the truck beyond the sticker price. What are the recurring costs that come with buying a particular model?

You want a truck that’s highly reliable and doesn’t burn holes in your pockets whenever you want to fill up the gas tank. Then you also need to ask yourself how much you’re willing to pay for insurance. Remember, your credit lender expects you to get a comprehensive cover during the entire repayment period.

5. Shop for the best trade in offers near you

Where there’s high demand for a product or service, you’ll also find many sellers actively competing to dominate the market. As a customer, this competition benefits you by exposing you to a wide range of truck financing deals from various lenders.

Take time to make a list of credit lenders whom you think can offer you a good deal then visit their offices. Find out what books they use to determine values of trucks because they’ll also use the same approach to work out a trade in offer. Also, check how long it takes to get the process done.

6. Get a cosigner

Some credit lenders are more cautious than others when dealing with debtors with bad credit scores. You might find a bank or credit union that has fantastic interest rates and wonderful repayment periods but there’s a catch. Buyers must present cosigners when applying for truck loans.

Truth is, it’s hard to get a cosigner at the last minute. You need a lot of time to find and convince someone to take that financial risk with you. How soon should you start looking for a cosigner? At least one month before your purchase.

Read about liens

7. Save up a huge down payment

Bad credit loans are expensive compared to typical auto financing due to the double-digit interest rates. If your credit score is above 720, lenders will offer you financing at either 3 or 4 %. However, a bad credit customer whose score is below 550 ends up paying 14-16% interest.

The best way of reducing your monthly payments is by showing up with a huge down payment. Plan to show up with at least 40-50% of the sticker price. Doing this enables you to increase your monthly payment in order to reduce the loan duration.

8. Apply for a pre approved truck loan

A pre approved truck loan is whereby a bank or credit lender offers you money to buy a new or used car. Unlike inhouse financing where you have to settle for a certain car, the bank allows you to buy any car from any dealership or private seller.

What are the benefits of this purchasing method? It instills in you the same amount of confidence as a cash buyer. This gives you the freedom to walk away from a bad deal because you already have your financing sorted out. You also get the opportunity to compare your bank’s deal with the truck dealership’s financing deal.

9. Get a referral to the best bad credit lender

If you’ve never bought a car or truck using a bad credit loan, then you might know someone who did. It could be a friend or relative who was once in a similar situation that you’re currently facing. Rather than hoping to stumble on a good creditor, you’re better off seeking a referral.

Having a referral enables you to prepare all the necessary documents at home. Doing this makes loan processing faster. Plus, you also get to establish a good relationship with the lender when a former customer brings you on board.

10. Avoid bad credit behavior before applying for financing

Credit lenders view certain activities as red flags that make a potential debtor unsuitable for business. These behaviors signal financial instability and no lender wants to spend time and money following up on late payments. What are these red flags?

Applying for several truck loans within a span of two weeks or less. When a potential creditor sees the high number of lenders who’ve accessed your report within such a short time, they can tell that you have a high rejection rate. Avoid applying for several credit cards during this period because it brings about the same conclusion.

11. Avoid deals that are too enticing

Just like any market, the bad credit financing sector has a few shady lenders waiting to pounce on desperate victims. You may come across a dealership offering really nice monthly payments that amount to 40-50% of what other truck sellers offered you. However, when you have a professional look at the truck, it dawns on you that the engine is a total rebuilt. That’s even worse than an old used car.

You ought to keep an eye out for bait-and-switch financing deals. How do they work? A truck dealership entices you with an amazing truck and a low-interest rate. However, as soon as you sign up, the dealer informs you that the low-interest rate expires after six months. After this period, the interest rate might rise by three or four points.

Are you thinking of getting a military car loan?

Now you know

As a truck buyer, your priorities are getting value for money and boosting your credit ratings simultaneously. That’s why you need these 11 tips to guide your purchasing decision.

Suggested read: How to apply for private party auto financing

Apply Now Get Started