Commercial Vehicle Loan: Factors to Consider

Home loans, auto loans, and personal loans are all terms we’ve heard before. Most of us are also aware of the purpose of these loans. Only a few of us, however, are aware of commercial loan. Let’s try to figure out what these loans are for, how to get them, and who can get them.

Purpose of commercial vehicle loan

Loans for the purchase of autos for commercial or business purposes are known as commercial vehicle loans. Borrowers include self-employed persons, trusts, partnership firms, organizations, and so on. These car loans are available to those who work in the transportation business. Buses, trucks, tippers, tankers, light and compact commercial vehicles can all be purchased with a commercial vehicle loan.

As we said, these loans are typically taken out by those who work in the transportation industry. So buses, tippers, transit mixers, and any other heavy, light, or small commercial vehicle can apply for a commercial vehicle loan. A commercial vehicle loan can be used to finance a wide range of commercial vehicles that will be employed in various locations.

Features 

• If your profile fulfills the criteria set forth by the lenders, you may qualify for a low-interest commercial car loan.
• The majority of India’s major banks offer commercial vehicle loans with low interest rates and no collateral requirements.
• A commercial vehicle loan has a short processing period and requires little documentation.
• It takes about 7 days for the loan money to be disbursed when all relevant paperwork is completed.
• From the beginning until the vehicle is purchased, some banks appoint a personal relationship manager. He or she will take care of all loan papers and issues.

Types of commercial vehicle loans

Commercial vehicle loan is divided into three groups based on the types of vehicles for which these loans are sought:

New commercial vehicle loan

Customers can get this form of commercial vehicle loan to buy new commercial cars for their businesses. Because banks will finance up to 100% of the value of the vehicle’s chassis or base frame. But in certain situations, based on the borrower’s profile, some banks give additional finance for vehicle body assembly.

Old commercial vehicle loan

Loans for the purchase of pre-owned or used commercial vehicles are known as old or used commercial vehicle loans. Under this loan, borrowers can expect to acquire finance for vehicles that are up to 15 years old. The majority of banks will fund up to 90% of the old vehicle’s value or depreciation grid value.

Commercial vehicle refinancing

Banks either offer a loan on an existing vehicle that is already debt-free or take over an existing commercial vehicle loan and provide extra financing based on eligibility. While some borrowers can cut their monthly EMIs and free up cash by refinancing their existing loan at a cheaper interest rate, others can arrange direct financing on their free vehicles to satisfy their working capital requirements.

Loan Process

To apply for a commercial vehicle loan, the borrower must complete an application form and provide all required documentation. Proof of address (passport, ration card, voter ID), proof of relevant experience, track record of previous loans (if taken out), and six months bank statements are among the documents required.

Borrowers must also produce two years’ worth of income tax returns, audited balance sheets, and profit and loss account statements. Copy of RC (registration certificate) books and a list of owned vehicles.

The loan is usually approved within seven days of the bank receiving the relevant documentation. However, depending on the form of the loan, the amount of money, and the location, the time it takes to sanction the loan may vary.

Loan amount and tenure

Depending on the exact requirement, the loan amount may differ. The chassis can be funded up to 100%, and the body can be funded based on particular requirements and previous experiences.

The engine, transmission, driveshaft, differential, and suspension are all part of the chassis.

The loan can last anywhere between six and sixty months.

Interest rate

Depending on the customer and car segment, interest rates range from ten percent to fifteen percent. Self-employed, corporate, businessmen, and partnership firms make up the client section, whereas the vehicle category includes trucks, buses, cars, and other vehicles. 

The vehicle loan rates are determined by a variety of factors, including the borrower’s number of vehicles, business turnover, and previous repayment history with other lenders (if any). After studying the documentation, financial institutions are able to validate the interest rate. It’s possible that the interest rate will be fixed or variable.

Repayment

To repay your debt, you must pay it back in regular installments. For instance, the monthly payment is made up of principle and interest, which is calculated using the loan agreement’s interest rate.