Factors to Consider While Looking for Commercial Vehicle Finance

Factors to Consider While Looking for Commercial Vehicle FinanceIf an individual or a business is looking to manage the flow of cash, preserve capital for the future, get flexible financing solutions as high priority while buying commercial vehicles, then they should look at the best finance for commercial vehicles. Some of the factors that play an important role in this financing option are-

  • Loan process

The borrower looking for commercial vehicle finance need to ensure that the application form is completely filled out. The documents to be submitted include a document that validates the proof of address (like the ration card, voters ID, and passport), document that validates the proof of existence in a particularly relevant area, track record of the previous loans, and a statement that contains bank transactions for the previous 6 months.

In addition to this, the borrowers will need to submit tax returns for the past two years, balance sheets that are audited, and the company’s P&L statements. Also, the list of vehicles owned by the borrower along with the photo copies of their registration certificates also needs to be submitted. Some lenders ask for certain transportation contracts for a higher value of funding. In certain cases, banks might ask for guarantor as well.

Factors to Consider While Looking for Commercial Vehicle Finance

  • Who can avail finance or Commercial Vehicles

Loans can be availed by co-applicants, individuals, partners working for partnership firms, and the directors that are working in private limited companies. In the case of individual loans, blood relatives can join the loan as well.

  • The Loan Approval Process

Usually, the loan is approved in seven days after all the documents are submitted. However, the overall time taken to sanction the loan depends on the location, the value of funding, and the overall nature of the loan. Usually, the lender who specializes in providing commercial vehicle finance transfers the money directly to the dealer who is selling the vehicle and not to the borrower. This is because there have been many cases of the borrower abusing these loans and misusing the funds on some other expense.

  • Total Value of Loan Amount and the Tenure

The total amount of the loan varies depending on the specific requirement of the borrower. The value of funding can go up to 100% of the body and chassis. Sometimes, this funding value can go beyond the 100% based on special requirements or past experiences. The chassis refers to the internal structure like suspension, differential, driveshaft, and engine.

  • Interest rates

Commercial vehicle finance comes with the interest that ranges from 10% to 15%. The customer segment contains corporate businessmen, partnership firms, and self-employed individuals. The vehicle segment includes vehicles like cars, buses, trucks, etc. The interest rate is influenced by the total number of commercial vehicles that are owned by the borrower, the turnover of the business, ability of the borrower to repay the money based on the track record with previous lenders. The finance institutions will be able to finally confirm the rate of interest once all the documents are studied. The interest rate is usually variable or fixed.

  • Processing Charges

Commercial vehicle finance includes stamp duty, processing fees, and valuation charges for the vehicles. The total processing fees depend on the total value of the loan. The range of this fee is usually 2 to 4%. One more important point to remember is that this fee is not refundable. If the borrower plans on repaying the loan in advance, then an additional fee of 2% is charged to the borrower.

So, the borrower needs to make sure that all the above-mentioned factors are considered before making the decision.

Picture Credit: RawpixelBlueBoeing


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