Factors to Check Before Opting for a Commercial Vehicle Loan

Commercial vehicle loans are the kinds of loans taken to finance the cost of owning and using commercial vehicles. They may be availed by firms (partnership/proprietorship), public companies, private companies, trusts or societies, or even self-employed individuals. While different kinds of loans, such as home loans, mortgage loans, personal loans, gold loans, and so on, maybe well-known, it is essential to be aware of other options that can help provide financial footing and expand your business.


If you are engaged in or are planning to engage in the transportation business, you can avail of this loan. It can be used for heavy, light, and small commercial vehicles, such as buses, transit mixers, etc. Loans can be availed for both new commercial vehicles, as well as pre-owned vehicles. Moreover, it can be availed for multiple vehicles in different locations. If you are interested in this loan, it may be helpful to know some facts such as the interest rate, the benefits of taking a commercial vehicle loan, and so on.


How can one avail of the loan?

The applicant must fill in an application form and fulfill the requirement for all the necessary documents. This may include the basics, such as address proofs like passports or voter IDs, proof of experience in the specific type of occupation, information about past loans, bank statements, income tax returns, balance sheets, list of vehicles and their registration, and more depending upon the financial institution. 


Who can be an applicant?

The commercial vehicle loan can be availed by individuals (with their blood relatives), partners in a partnership firm, or directors in private limited companies (in case of a joint loan). However, a minimum amount has to be availed, ranging from 1 lakh for small-scale loans and 5 crores in case of applicants from a corporate background.


What is the further process like?

Next, one has to wait until the loan is approved, which may take seven days or so after submitting the required documents. However, the time taken for the loan to be approved may differ for different applicants, depending on the kind of loan, the amount being borrowed, and features specific to the financial institution. The amount may also be directly disbursed to the vehicle dealer in some cases.


What is the loan amount like?

The loan amount depends mainly on the specific requirement. It may vary from 100% of the internal structure of the vehicle to different amounts in case of special requirements. The tenure may be anywhere from 6 months to 60 months.


What are the interest rates like?

Commercial vehicle loan interest rates may vary from 10% to 15% depending on the loan amount, the kind of customer, the vehicle segment, and so on. The interest rate may also be a fixed one or could be variable. The rate of interest also depends on factors like the business turnover of the applicant, the repayment record from other lenders, the number of vehicles owned by the applicant, and so on. Financial institutions confirm the interest rates after studying the submitted documents.


The interest may have to be paid monthly, which includes the principal amount and the interest rate.


How much does one have to pay in processing charges?

The processing fee, vehicle valuation fee, stamp duty, and other charges depending on the commercial vehicle loan amount may vary between 2-4% and are non-refundable. 


Thus, a commercial vehicle loan is a less-heard-of but useful loan for business owners or aspiring entrepreneurs who would like to get involved in the transportation business. It is important to deal only with trusted financial institutions for the best loan experience.

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