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Factors To Consider While Availing A Commercial Vehicle Loan

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You can get a commercial vehicle loan when you are a self-employed individual, business, or other entity. You can opt for this loan when you want to buy the vehicle for use for commercial purposes. Commercial vehicles can be anything like tippers, trucks, tankers, lightweight commercial vehicles and buses.

Commercial vehicles are costly to buy when compared to other vehicles. Many financial providers offer options to get a commercial vehicle with the best loan options. But you should ensure that you fulfil the eligibility requirement for getting a commercial vehicle loan. Many financial providers provide this loan with minimal documentation and hassle-free processing.

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Different Types Of Commercial Vehicle Loan:

Commercial vehicle loans are divided into different types based on the vehicles you buy. Here are the common types of commercial vehicle loans available:

New Commercial Vehicle Loan:

If you want to purchase an all-new commercial vehicle, you can use the new commercial vehicle loan. Some financial providers offer 100% of the vehicle amount as a loan.

Used Commercial Vehicle Loan:

When you want to buy used commercial vehicles, you can get them with the help of a used commercial vehicle loan. The financial provider will offer up to 90% of the vehicle amount as a loan. But, you cannot get a loan for vehicles that are more than 15 years old.

Commercial Vehicle Refinancing Loan:

With the help of commercial vehicle refinancing, financial providers provide loans for existing commercial vehicles. It will help you take over your existing commercial vehicle loan and make your loan accessible. It will also provide additional finances for helping you based on your eligibility criteria. 

Some borrowers can reduce the monthly EMIs of their existing loans and get free cash up by refinancing their existing loans at a lower interest rate. Some will get direct finance on their vehicles for utilizing it for fulfilling their working capital requirements.

Processing Of The Loan:

The process for applying for a commercial vehicle loan is very similar to that of other loans. You can apply for this loan both offline and online from any financial provider available in the market. You should fill in the commercial vehicle loan application form with accurate details and attest it with your signature.

The loan applicant must provide the relevant documents with the application form while submitting it for further processing. Usually, it will take four days to a week to get your loan process; it will vary depending on the financial provider. The financial provider will then confirm your loan approval, following specific processes before getting the loan sanctioned. 

Documents Required For Commercial Vehicle Loan:

Here are the standard documents that are required for getting a commercial vehicle loan:

  • Address proof
  • Experience proof (Relevant industry experience)
  • Last six months bank statements
  • Track record of your previous loans
  • Past two years ITR
  • Profit and loss statement
  • List of vehicles owned previously by the loan applicant
  • Audited balance sheet
  • Copies of registration certificate

Some financial providers will also ask for transportation contracts when you are looking for a higher loan amount. Some might also ask for a personal guarantor. 

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Who Is Eligible To Get A Commercial Vehicle Loan?

Commercial vehicle loans are generally used by customers for meeting their business vehicle needs. Here are some of the customers who are eligible to get commercial vehicle loans for their business requirements:

  • First time users and buyers
  • Self-employed individuals
  • Public and private limited companies
  • Schools and colleges
  • Transportation business owners with small, medium and large-sized fleets
  • Trusts, societies and hospitals
  • Proprietorship firms
  • Partnership firms
  • Captive customers and transporters

You can get a commercial vehicle loan when you are a joint venture partner or director of any private company. You can also jointly apply for a commercial vehicle loan with your business partner. You can also ask your blood relatives to co-apply for the loan with you. Depending upon the size of your company, you can get a commercial vehicle loan amount for your needs. 

Process Of Loan Approval:

The loan approval process and sanctioning of the loan will require some time. Usually, financial providers will take about a week for approving your loan application and verify the process. Depending upon the financial provider, the loan sanctioning time varies. 

Depending on your business nature, the loan amount you want, and your business location, the time is taken to get a commercial vehicle loan. Usually, financial providers will sanction and disburse loans directly to your vehicle dealers from purchasing the loan.

Loan Amount & Tenure:

Depending upon your business requirement, the loan amount will vary. Financial providers can fund you up to a maximum of 100% for the chassis of the vehicle. However, the funding required for the vehicle’s body can be extended when there is an additional requirement.

Chassis is the vehicle’s internal structure, including the engine, driveshaft, transmission, suspension, and differential. Usually, commercial vehicle loans are loans that are sanctioned with a tenure of sixty months. You can choose it depending on your financial status. 

Interest Rate:

All major financial providers offer commercial vehicle loans for their customers. The interest rate for commercial vehicle loans will range between 10% to 15% per year, depending on the vehicle they buy and the business profile. 

Also, there are specific factors that the financial provider will have in mind before sanctioning the loan. Those are their business turnover, credibility, number of vehicles they already own, repayment history, and so on. 

Processing Fees:

The processing fee is a certain percentage of the loan amount based on the financial provider you get your loan. It is a one-time fee that you should pay to your financial provider for processing your loan. It is a non-refundable fee that you have to pay even if your loan application gets rejected.

Some financial providers will not have any processing fees for the loan you borrow. Some financial providers will ask for the processing fee, vehicle evaluation charges and stamp duty fees for processing your loan. The fees will be from 1% to 4% of the loan amount, depending upon your financial provider, the loan amount you borrow and many other factors. 

Repayment Of The Loan:

You will be repaying the loan on monthly EMIs. The EMI will comprise the principal amount and the interest calculated for the loan as per the loan agreement. You can get a pre closure option for your vehicle loan, depending upon the financial provider you choose. However, the borrower will have to pay a certain amount as a penalty for the outstanding loan amount.

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