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Are you itching to hit the open road or find your perfect escape in the great outdoors with a trusty trailer by your side? Whether you’re yearning for adventures out of the bed of a trailer, or trying to expand your business into new markets, it’s all too easy to find yourself instead bogged down by financial happenstance. If that sounds like you, then financing your trailer through a straightforward, simple interest loan might just be the solution you’ve been looking for. In this post, we’ll run you through the ins-and-outs of trailer financing through a standard loan to help you understand why it might be the key to realizing your hauling potential. We’ll address your burning questions, from how the loan financing process works to eligibility criteria, and even the potential challenges you might face, like high interest rates if you have a less-than-perfect credit history.
First things first, why should you consider financing your trailer? Well, the answer is straightforward – it makes owning a trailer more accessible and affordable. Trailers come in a wide range of styles and sizes, and they serve various purposes, from expanding the capabilities of your business (anything from landscaping to hot shot trucking), to hauling your favorite toys (like ATVs or motorcycles).
Simple interest loan financing is a common practice on the consumer side of the automotive industry, as it allows you to spread the payments for a high-cost piece of property over a set period, making it easier on your monthly wallet. By financing, you can start enjoying the benefits of trailer ownership without depleting your savings or having to come up with a substantial lump sum. It’s a way to break down a significant expense into manageable monthly payments, which is often a prerequisite of the average budget. Better yet, if your trailer’s a business expense, it may pay for itself well before you’re done paying it off.
It is very similar to financing a car. Here’s a basic rundown of the process:
Begin by choosing the trailer that suits your needs, lifestyle, and budget. Whether it’s for business or for pleasure, ensure you have a clear understanding of what you want. Check out our other blog posts if you need help deciding which trailer is right for you.
Once you’ve picked your ideal trailer, assess your finances. Determine the down payment you can afford, as well as the monthly payments you’re comfortable making. Consider your budget and make sure you’re not overextending yourself. You don’t need to be a meteorologist to know things don’t always end up as predicted, so make sure to keep some money set aside if possible.
You have two primary options for financing your trailer. You can either secure a loan from a lender like a bank or credit union, or you can explore financing options offered by the dealership where you’re purchasing the trailer. Each has its pros and cons, so it’s essential to weigh your choices. You may find it handy to utilize Mid State Trailer’s financing calculator, which can be found here.
If you choose to go through a lender, you’ll need to complete a loan application. This typically requires providing information about your income, employment history, and credit score. Be prepared to provide documents like pay stubs and bank statements.
If your application is approved, the lender will present you with the loan terms. This includes the down payment required, interest rate, the length of the loan (often expressed in months), and your monthly payment amount.
In most instances, even with good credit, you will be required to make a down payment of 10% to 20% on your trailer. The down payment provides the lender with equity in the trailer, should the loan go into default, helps reduce the loan amount, and, in turn, lowers your monthly payments.
With your loan approved and down payment made, you’ll start making regular monthly payments, normally 45 to 60 days after you’ve taken possession of the trailer, until the loan is paid off. The interest rate will affect the overall cost of the trailer, so it’s wise to secure a favorable rate if possible.
After your final payment, you’ll receive the title to your trailer, officially making it yours. This means no more monthly payments, and you’re free to enjoy your hauling adventures to the fullest.
The benefits of financing your trailer are worth considering:
Financing breaks down the cost of your trailer into smaller, manageable payments, making it more affordable.
You don’t have to exhaust your savings or emergency fund to acquire a trailer. This financial cushion can be handy for unexpected expenses.
Even though your lender will have an equity interest in the trailer, you’ll own the trailer from day one, and your equity in the trailer increases as you make payments.
Lenders often offer various term lengths, allowing you to choose a repayment period that suits your budget. It’s important to note that in most instances, the longer the term of your loan, the higher the interest rate charged.
If you’ll be using your trailer for business, you might be eligible for certain tax deductions related to trailer financing and depreciation on the trailer itself. Consult a tax professional for specific advice.
The good news is that trailer financing is available to a wide range of individuals, although eligibility criteria can vary from lender to lender. Let’s look at some of the key factors that can influence your eligibility:
Your credit score plays a significant role in determining your eligibility for trailer financing. Lenders use your credit history to assess your creditworthiness. If you have a good credit score (typically 700 or above), you’re more likely to qualify for a simple interest loan, and the higher your score, the lower interest rates and better loan terms you can expect. On the other hand, if you have bad credit or a limited credit history, you might still be eligible, but you could face higher interest rates and less favorable terms such as high-interest rates. Be wary of predatory lenders – it’s far too easy to fall victim to those seeking to take advantage of those lacking financial savvy. If a loan seems too good to be true, make sure to read the fine print. This is why it’s safe to finance through Mid State Trailer’s trusted lending partners. While we do not finance directly with our customers, we have years of experience working with our lending partners and can make a recommendation based on your specific needs and financial situation.
Lenders will also consider your income and employment stability. A steady job with a reliable income source makes you a more attractive candidate for financing. They’ll want to see that you have the means to repay the loan.
Your debt-to-income ratio, which measures your monthly debt payments against your monthly income, is another important factor. Lenders prefer to see a lower debt-to-income ratio, as it suggests you have more financial flexibility to manage your loan payments.
The size of your down payment can affect your eligibility and loan terms. A larger down payment can reduce the loan amount and potentially help you secure better interest rates.
If your credit or financial situation isn’t strong enough to qualify for financing on your own, having a co-signer with a strong credit history can increase your chances of approval.
Dealerships often have more flexible eligibility criteria for financing, making them a good option for those with less-than-perfect credit or limited financial history. However, keep in mind that dealer financing might come with higher interest rates compared to securing a loan from a bank or credit union.
If you initially face higher interest rates due to bad credit or other factors, you may have the option to refinance your trailer loan in the future. As your credit improves and you make consistent payments, you could qualify for a lower interest rate, reducing your monthly payments and overall trailer cost.
Financing your trailer through a simple interest loan can be the key to turning your hauling and transport dreams into a reality. It offers an accessible path to trailer ownership, allowing you to spread the cost over time and fit it into your budget. While there may be some challenges, such as high interest rates for those with bad credit, with careful planning and smart financial choices, you can make trailer ownership a reality. Just remember to shop around, understand the terms of your loan, and stay on top of your budget. So, what are you waiting for? Start exploring your financing options today and get hauling! If you would like a quote or have any questions about our trailers, give our friendly trailer experts a call at (336) 857-2888.