Credit Score and No Down Payment
“I want to get financing for my business equipment. My credit is Poor/Fair/Good/Very Good/Excellent, and I want no down payment, or barring that, as low of a down payment as possible. What options are open for me? How high of a credit score is needed for no down payment?”
We at TopMark Funding get asked this a lot, and since the customer is always right, we thought it would be good to write an article and derive a ballpark answer for people.
Down Payment from the Financial Representative’s Mouth
We talked with Nick Gilmore, Senior Sales Manager here at TopMark Funding, about the link between credit score and down payment.
“It’s not the score alone, it’s the content of the credit as well,” Nick said. “Typically, we are looking for stronger credit profiles, comprised of well-paid installment debt. Homeownership is a key factor to strengthening a profile as well.”
“We take a number of factors into consideration when viewing a client’s profile. This includes the number of payments made on installment tradelines, how far back the credit history goes, and how many recent hard inquiries have been made on the credit.”
“We have different programs based on creditworthiness. When people ask about a down payment, what they really should be asking about is the upfront cost. This would include placement fees and upfront payments that reduce the length of the term.”
Beyond TopMark’s financial expertise, we also have the details of all funded transactions at our disposal. Here is an aggregation of funded transactions in 2019, anonymously comparing FICO scores with upfront payment % of the equipment purchase deals. Note that for groups of people that had the same FICO score, we took the average of their upfront cost percentages, otherwise the graph would be difficult if not impossible to read.
Here is what we learn from this graph:
- Credit score has a weak negative correlation (-0.4766 for you math nerds out there) with the average upfront percentage. As the credit score goes up, the percentage of the total due upfront tends to go down.
- Using regression (the dotted trendline), we find that an increase in credit score of one point tends to lower the percent due upfront by 0.056%. This may seem marginal, but an increase from 600 to 650 reduces the average upfront percentage by just a little over 2.8%. If the total deal for a slightly used Freightliner were $121,000, then that 2.8% change means $3,388 less out of your pocket.
- Having a low credit score does not automatically disqualify you from getting a loan. At the same time, unless you like the idea of paying more than half upfront, it literally pays to have a higher credit score.
- Having a high credit score does not automatically mean you will not have to pay money upfront, people with 506 FICO have gotten 0% upfront and people with 806 FICO have gotten 20% upfront, but it certainly increases your odds. Once you pass 600 FICO, the upfront percentage becomes much more manageable.
No Credit Check Semi-Truck Financing
The phrase “no credit check semi-truck financing” sounds too good to be true for some people looking for a new truck. What it means is an individual was able to get a loan for their vehicle purchase without having the lender look into their borrowing history. The big question here is… Does no credit check semi-truck financing even exist?
Acquiring commercial truck financing check-free is not completely impossible, but it is not necessarily easy to do. You may find yourself in more of a hindrance than you would by going the more traditional application routes.
If you are an owner-operator with good business credit, decent annual revenue, and are working with a flexible lender who you’ve worked with before, you might be able to work out an affordable way to get a credit check free financing. But what about anyone else that wants a loan without a credit check? Must you have your credit looked into by businesses when all you want is a new truck?
Lucky for you, we have written an in-depth guide to aid you in your search for this type of program. If you want to brush up on your credit knowledge before checking out the ins and outs of semi truck financing with no credit checks, head on over to read The Trucker’s Guide to Understanding Credit.
Why It’s Difficult to Find No Credit Check Semi Truck Financing
Finding any reputable lending sources that have no credit check business loans or financing programs is pretty difficult to come by. If a lender does offer a program like that, you should proceed cautiously as this is outside the norms of the lending world.
The reason most banks and other credit grantors want to see your credit is that they want to know if you’ll pay them back as promised. Your credit score and credit report are the fast and easy way for lenders to see what types of risks you present to them and their funds. Companies that forgo any type of credit check will possibly be looking to charge you with high-interest rates and large down payments to secure the money.
There is also the risk these companies are predatory and looking to lure in desperate people who need money but can’t go anywhere else. They may operate with shady contracts, high-interest rates, and hidden fees as their borrowers have no other lending options.
At the same time, other reputable banks and lenders might pass on the credit check if you present good bank statements and have a strong history with your business. For those instances, you’ll often need to be able to prove you’re in a pretty decent financial spot for most reputable credit grantors to skip a credit check.
Financing a semi-truck or trailer is no different than any other type of borrowing. If you are hell-bent on finding a lender that does not run a credit check, tread very carefully. Read all contracts and look into the business before you possibly sign all your money away to a predatory loan you cannot pay off.
In short, a good lender will want to assess their risks and rewards regarding who they are approving for loans and financing. Just as you should investigate their practices, those businesses need to know they won’t lose the money they lent to a customer. This is why credit checks are so important in the financial world and almost unavoidable.
Unless you can compensate with other strong credentials, there are few reputable companies that will give you an affordable semi-truck loan with no credit check.
Optimizing Your Semi-Truck Financing Experience
If you are in the market for commercial truck financing, your focus should be on companies that specialize in equipment financing. These lenders provide you with the funds and help organize the purchase of your equipment.
Equipment lending companies secure the debt borrowed with the very equipment that was purchased. Meaning, if you get approved for semi-truck financing, your truck will be the collateral for the financing itself. This way, truck financing is considered secured financing and allows you access to lower interest rates, longer terms, and much bigger loan amounts. If you were to just go out and borrow money in the form of a loan and then use that money to purchase your own truck, you would be looking at an unsecured loan.
Unsecured loans are more credit history and income-focused as there is no collateral or assets to be pledged. These types of loans will often have shorter repayment terms and higher starting interest rates.
Due to the large amounts of money often needed to purchase a commercial truck, longer repayment terms desired, and the advantages a secured loan present, equipment lenders are the ideal companies to work with for semi-truck financing. Additionally, the approval process is more catered to trucking companies.
Learn more about How to Get Semi-Truck Financing
Why Do You Want No Credit Semi-Truck Financing?
If you have done a lot of truck financing research, you have noticed that almost all leasing and financing companies want to see what is in your credit report or at least take a look at your score. As we mentioned before, a credible business will want to protect itself rather than lure desperate customers into high-interest loans.
Don’t feel discouraged. There are still options for you even if it means a lender looking into your report. So before you can decide what exactly you need from lenders, you need to think about why you specifically don’t want them to see your credit. Most likely, it is because you have less than perfect credit, you don’t want your score to be damaged by hard credit pulls, or possibly both.
If you want to learn more about the dangers of avoiding a credit check, you can check out our article on No Credit Check Semi-Truck Financing.
Loan terms are a balancing act of numerous factors, two of which are credit score and money put upfront. From the aggregation of funded deals from 2019, we find what we expect: a higher credit score tends to mean lower upfront costs as a percentage of the total deal. Surely if we were to do the same statistical analysis for credit score and interest rate, we would find similar results.
Just like how people with a FICO score of 677 and above are three times more likely to find a deal they like, having a credit score above 600 generally seems to be the ticket to getting upfront rates at 20% and below. Having a lower credit score should not discourage you from applying with a credible company that provides financing, especially when the alternative is to apply with a back alley no credit check firm that may sign you onto predatory interest rates. If you are unsure as to whether or not you can obtain a zero upfront payment deal on your next truck or trailer, you can always check with TopMark Funding. Our application process does a soft pull of your credit, keeping your credit score from dropping and ensuring you get the best deal you can get. Once you fulfill an application and get pre-approval after the soft credit check, you can shop dealerships for the truck or trailer that best suits you.
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ABOUT TOPMARK FUNDING
TopMark Funding is a top-rated semi-truck financing and equipment financing company located in Roseville, CA. We specialize in commercial trucking and heavy equipment. Our mission is to become your long-term financial partner by helping you grow your trucking business and fleet.
We’re not here for the short term, we’re on the long haul with you!
Learn more about Semi-Truck Financing
Fill out The Trucker’s Guide to Understanding Credit. or give us a call at (866) 627-6644. One of our truck financing specialists will contact you as soon as possible to go over your truck lease needs and learn more about you and your business financing goals.