Truck Financing Glossary (2026)

Amortization: Paying off a loan in regular payments that cover both interest and principal. Early payments are mostly interest; later ones are mostly principal.
APR: Annual percentage rate. The yearly cost of borrowing, shown as a percentage. Compare APRs between offers, and ask whether fees are included.
Balloon payment: A large lump sum due at the end of a loan. It lowers the monthly payment, but you have to pay, refinance or sell when it comes due.
BOC-3: The filing that names a process agent in each state for your trucking authority. Required before your authority becomes active.
Collateral: Something the lender can take if you stop paying. With truck loans, the truck itself is usually the collateral.
Co-signer: Someone who agrees to repay the loan if you don't. Their credit can help you qualify, but they're fully responsible too.
Down payment: The cash you pay upfront. A bigger down payment lowers what you borrow and the interest you pay.
Equipment financing: A loan used to buy equipment, like a truck or trailer, that is secured by that equipment.
Factoring: Selling your freight invoices to a company that pays you most of the amount right away, then collects from the broker for a fee.
Fair market value (FMV) lease: A lease where the buyout at the end is whatever the truck is worth then. Payments may be lower, but the buyout can be large.
IFTA: The International Fuel Tax Agreement. Lets interstate carriers report fuel taxes to their home state.
IRP: The International Registration Plan. Lets your truck be registered across states with apportioned plates.
Lease-purchase: A deal, often offered by carriers, to lease a truck with the option to own it. Read the terms closely; many drivers end up owning nothing.
MC number: Your operating authority number from the FMCSA, needed to haul regulated freight for hire across state lines.
Principal: The amount you borrowed, not counting interest.
Recourse factoring: Factoring where you owe the money back if the broker doesn't pay. Non-recourse covers some of that risk for a higher fee.
Term: How long you have to repay the loan, usually in months.
TRAC lease: A lease common for commercial vehicles where the end value is set upfront, so you know your buyout from the start.
UCR: Unified Carrier Registration. An annual registration required for most interstate carriers.
USDOT number: The number the FMCSA uses to identify your company and track its safety record.

Truck financing glossary

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