Secured truck finance is backed by the vehicle or another asset and generally comes with lower rates and larger approved amounts, while unsecured finance skips the collateral requirement in exchange for tighter limits and higher pricing. Choosing between the two comes down to your business's asset position, cash flow and how you plan to use the funds.
What Secured Truck Finance Means
Secured truck finance uses the truck, trailer or other asset being purchased (or sometimes another business asset) as collateral for the loan. Because the lender has a tangible asset to fall back on if repayments stop, secured finance is the more common structure for commercial vehicles and typically carries lower risk for the lender, which can flow through to more competitive pricing and larger approved amounts.
What Unsecured Truck Finance Means
Unsecured finance doesn't require a specific asset as collateral, with approval instead based largely on the strength of the business, its cash flow and credit history. This flexibility can suit businesses that want funds for reasons beyond a single vehicle purchase, such as working capital alongside a truck upgrade, but it generally comes with tighter limits and a higher cost of funds to compensate the lender for the added risk.
How Rates And Risk Compare
Because secured lending is backed by an asset, rates on secured truck finance generally start lower, from 6.55% p.a. for well-qualified applicants, while unsecured or higher-risk lending can run up to around 15% p.a. depending on the lender's assessment of the business and the deal. Rates are indicative only and remain subject to lender criteria, credit assessment, fees, loan term and final approval.
Which Structure Suits Your Business
Secured finance tends to make sense when you're buying a specific truck or trailer and want the lowest possible rate on a straightforward asset purchase, while unsecured finance can suit businesses seeking more flexible use of funds or that prefer not to tie a specific asset to the loan. Many operators also use a mix, financing the vehicle itself on a secured basis while keeping other lines of credit unsecured.
Documentation And Approval Speed
Both structures may potentially be arranged with low, lite or no-doc options up to $500,000 for eligible businesses, while full-doc applications may support amounts up to $10M and beyond for larger fleets, subject to approval. No-deposit options with up to 100% finance may be available on eligible secured deals, and same-day pre-approvals with full approval sometimes possible within 24 to 48 hours can help you move quickly once you've settled on a truck, though timing depends on lender assessment.
Loan Amounts And Terms To Expect
Truck and trailer finance arranged through Overdrive typically ranges from $20,000 to $10M or more, with terms from 1 to 7 years depending on the asset's age, use and the structure chosen. Matching the right amount and term to your cash flow, whether the loan is secured or unsecured, is one of the areas where comparing multiple lenders makes the biggest difference to your total cost.
Get An Obligation-Free Comparison
Working out whether secured or unsecured truck finance suits your business doesn't need to be guesswork. As a broker, Overdrive Truck Finance compares 80+ banks and non-bank lenders to help find a structure that fits your goals, subject to lender criteria and credit assessment. Enquiring involves a soft credit check that won't affect your credit score, so reach out today for an obligation-free quote.
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