There are several different ways that you can finance a truck or trailer for your business. Before you take out the trailer finance calculator to work out what you can afford, let us look at four of the financing options you should consider.
Chattel Mortgage
Chattel mortgages are a way of securing financing for movable property, whether it be vehicles or equipment, while using that particular asset as collateral for the loan. This allows you to own the asset once it has been paid off.
Once the asset is fully paid up, it becomes yours permanently. However, should you default on the loan, the lender can reclaim the asset to cover its losses. Chattel mortgages see the lender holding a mortgage over the chattel, this being the property until the loan is fully repaid, giving them the right to take the asset back in case of default.
Generally, chattel mortgages have more favourable terms, owing to the low risk for the lender. It is a good way to seek financing for trucks, trailers or other movable assets. They are a great option for businesses wanting to own their assets and are confident they can repay their loans.
Financial Lease
Leasing a truck or trailer is essentially a long-term rental agreement. It allows the business to acquire an asset such as a truck, trailer or any other equipment without needing to invest or commit to a substantial upfront investment. As a result, the business will just pay a periodic lease payment to the lessor for these assets over the lease term.
In financial leases, the convention is that the lessee assumes responsibility for the maintenance, insurance and other associated costs related to the upkeep and operation of the asset in question. However, at the end of the lease, the lessee has the option to purchase the asset outright if they so wish at an agreed-upon price.
The benefit of a financial lease is that it allows your business to acquire the asset without having to commit to full ownership upfront. It is a great option for businesses with limited capital or who wish to preserve liquidity.
A similar option in this vein is rent-to-own, except that each rental payment essentially acts as an installment towards the total purchase price.
Unsecured Loan
An unsecured loan is usually one of the least preferable options, as it typically comes with high interest rates due to the increased risk to the lender. Unsecured loans have no collateral or chattel attached to them, which allows the business to borrow funds without pledging any assets to cover the potential losses to the lender.
An unsecured loan is a useful option for businesses that lack collateral or are purchasing their first piece of equipment. The downside of an unsecured loan is that, generally, the loan amounts are smaller, and the interest rates are higher.
Use our useful truck and trailer finance calculator to figure out what a loan might cost you and how much you can afford. Then contact us at iCREDIT to start the application process.