It’s no secret that interest rates on the rise. Inflation has reached a high of 6.1% and unemployment a low of 3.5%. Economic conditions which has led to the RBA hiking the official cash rate by 1.25% in three months for more rises to come. As the cash rate rises so do interest rates across the lending markets. While many well-established business operators may be in a position to balance higher rated truck loans against increased cash flow from their own rising prices, this won’t apply to everyone. Of special concern may be those requiring bad credit truck loans.
For business operators who've encountered loan application rejections from lenders and find themselves in situations necessitating the pursuit of bad credit loans, the challenges can appear formidable. Even during periods of historically low interest rates, the path to securing any form of finance can seem daunting. The circumstances can feel discouraging, especially considering the upward trajectory of interest rates. Amidst this backdrop, even the most optimistic individuals might find their hopes of procuring new vehicles through financing gradually dwindling.
Despite interest rates rising, cost-effective bad credit truck loans may still be achievable through specialist broker-style lenders such as Jade Truck Loans. While this type of finance is not readily available through many of the traditional lenders, we have access to specialist non-bank lenders that are more flexible and are open to negotiating options for those applying for bad credit truck finance.
Bad Credit Loans Defined
It’s important to appreciate the definition of bad credit loans or more specifically, bad credit applicants. This definition does not necessarily apply to say brand new start-up businesses. A new business may be setting up operations and while they may not have all the documents required for a business application form, they may have a good credit profile. These businesses can consider Low Docs and No Docs Truck Finance.
Bad credit applicants are those with a poor credit score or rating and represents a high risk to lenders. This may be the result of a range of circumstances including loan defaults, bankruptcy, slow or missed bill payments or general poor decision making and financial management of the business.
The reasons for being in this position can be important to explain to your Jade consultant. Lenders can take into account the circumstances when assessing the loan application.
The bad credit rating may be for the business or for the individual with an owner-operator business. Prior to applying for new loans, operators in this situation may look to repairing their credit rating where possible. There may be errors which can be rectified.
Bad credit finance is not available through all banks and finance companies. There are last resort style lenders that offer such finance but at exorbitant rates and sometime unworkable terms and conditions. Before resorting to that option, bad credit applicants can look to working with us as their finance broker.
Broker services are available to bad credit customers and the benefits realised can be significant. We have non-bank lenders that do offer this type of truck finance and our consultants work hard to ensure a workable outcome is achieved.
Loan Product Options
The reference to ‘bad credit’ refers to the business. It is not a separate or different type of truck loan. When a bad credit application is approved, the business may select from the range of truck finance products available:
- Chattel Mortgage
- Rent to Buy
- Commercial Hire Purchase
In some instances the lender may have guidelines around which type of loan they will approve for bad credit customers.
As would be expected, the interest rate on bad credit truck loans will typically be higher than the lowest rates as advertised by lenders. The applicant is considered a higher risk and as such a higher interest will typically be offered.
Additional loan conditions can also apply for bad credit truck loans. These may include a limit on the loan amount and additional security/guarantee required in addition to the vehicle being purchased.
The current higher interest rates compared with earlier in the year, will increase the overall amount of the truck loan and even more so for bad credit truck loans with higher rates. This higher total amount may trigger additional loan conditions.
When approved and an offer made, bad credit truck loan applicants should still be eligible for current tax measures on asset acquisitions. These currently include temporary full expensing and loss carry back. If eligible, these measures may be utilised to offset the higher rates and any additional loan conditions on a bad credit truck loan.
Strategies for Achieving Positive Outcomes
In the real world, not every application for bad credit finance is approved. But there are actions and considerations that applicants can make to contribute to achieving a positive outcome that works for their business.
- Use a broker such as Jade Truck Loans rather than going it alone. Having our extensive expertise and resources working in your best interests can be of great benefit on getting approved and achieving a workable loan.
- Focus on achieving a repayment amount that works with cash flow and expected turnover rather than purely on the interest rate.
- Vary loan elements to achieve that target repayment. That may mean paying a deposit on the truck to reduce the loan amount or requesting variations in the loan term or balloon/residual. Agreeing to a repayment schedule that is not workable may place the business in a vulnerable position for default.
- Maintain a good repayment record with the new loan to repair bad credit record and build a good profile over the term of the loan.
- Potentially look to refinancing in a few years when credit score has improved.
- Prepare quality and extensive financials to support the application.
- Consult with a financial advisor to improve the business financial management if required.
Despite rates being in this current upward cycle, the availability of finance and truck loans is not generally affected. Yes, rates are higher than they were a few months ago, but the range of loan products, including Bad Credit Truck Loans and Low Doc No Doc Loans, remains fairly constant. To determine how these rates might impact your specific situation, you can use our Loan Repayment Calculator to gain a clear understanding of your potential repayments.
Contact Jade Truck Loans on 1300 000 003 to discuss the prospects for your business in regard to bad credit truck finance.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.