Everything You Need to Know About A Commercial Vehicle Loan

Nov 20, 2020

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A vehicle for business purposes can be extremely beneficial. This is especially true for enterprises involved in the transportation segment, since vehicles are an integral part of the business model. A commercial auto loan can help your business take advantage of good offers and discounts to purchase vehicles for business.

What is a Commercial Auto Loan?

Commercial vehicle finance or a business auto loan is a loan especially sanctioned for the purchase of a vehicle for business purposes. It is a type of business equipment financing for enterprises in the transportation business or any other small business that needs a vehicle for its operations.

Commercial vehicle loans are sanctioned for purchase of buses, trucks, tippers, transit mixers or other heavy vehicles and even lightweight commercial vehicles like matador vans. While a majority of commercial auto loans are used to purchase new vehicles, borrowers can also buy pre-owned vehicles. Depending on the type and usage of the vehicles, there are three different kinds of commercial vehicle loans:

  1. New Vehicle Loan

This commercial vehicle loan is offered to customers for purchasing brand-new automobiles. Usually, banks offer up to 100% of the base value of the vehicle. Some banks may also offer additional funds for added features, such as body construction on trucks or mixers used in the transportation business.

  1. Old Vehicle Loan

Businesses can also purchase pre-owned or used vehicles. Most banks offer funding to purchase vehicles that are up to 15 years old. Often, old vehicle loans are availed to purchase a fleet of commercial vehicles at attractive rates. Usually, up to 90% of the purchase value can be funded via these loans.

  1. Commercial Vehicle Refinancing

Commercial vehicle refinancing can be done by transferring an existing loan to a different lender to take advantage of better interest rates. Availing additional credit on an existing loan also qualifies as refinancing.

Who Can Apply for Commercial Vehicle Financing?

A commercial auto loan can be availed by any individual or organization, as long as the financing is used for a vehicle for business purposes. Individuals, sole proprietors, partnership firms, Hindu Undivided Families, trusts, societies, entrepreneurs, and private and public limited companies are eligible to apply for commercial vehicle finance.

Benefits of Commercial Vehicle Financing

There are many advantages to taking out a business auto loan:

  1. Multiple Options: Commercial vehicle loans are available to borrowers of diverse profiles including sole proprietors, partnerships, HUFs and companies. These loans can be used to purchase a wide variety of heavy-weight or light-weight vehicles depending on specific business requirements.
  2. No Collateral Needed: Most business auto loans, including commercial truck loans and fleet loans, do not require a collateral. Loans are sanctioned based on business profile and previous credit history.
  3. Flexible Payments: Many banks offer commercial auto loans for up to 5 years, offering EMI options or lump sum settlements for repayment. This gives businesses enough time to plan payments.
  4. Customized solutions: Often, banks will offer tailored loan terms to businesses depending on the type of vehicle to be purchased. The business profile will also be considered to customize loan amount, duration and frequency of payments.

How to Apply for a Loan for Commercial Vehicles?

Any individual or business can apply for a commercial vehicle loan with a bank, either at a physical branch or online. The borrower will need to fill in an application form and submit necessary documents for proof. Once the documents are verified, the loan will be sanctioned.

These are the list of documents usually needed for a commercial vehicle loan:

  • Age and ID proof
  • Aadhaar, PAN card, Voter's ID, driving license, passport or ration card
  • Residence proof
  • Income or business proof
  • List of existing owned vehicles along with ownership papers, registration certificates and licenses
  • Details of existing loans
  • Proof of commercial vehicle purchase
  • Processing fee cheque

The Gold Loan Advantage

For a business that does not have the required documents or credit worthiness to apply for a commercial vehicle loan, gold loans can be a great alternative. Business owners with personal gold assets can also avail these loans. As for the benefits of gold loans, they:

  • Provide high loan-to-value ratio for vehicle purchase needs during gold valuation
  • Do not require a borrower to have a strong credit history since they are secured loans
  • Have minimum documentation requirements
  • Provide flexible tenure and repayment options
  • Are convenient, quick and hassle-free
  • Do not have an end-use restriction and hence, can be used for other purposes too

Rupeekā€™s gold loans are a convenient borrowing option for entrepreneurs. A simple KYC registration is all that is required for these loans. The entire loan process can be completed online, from the comfort of your home or office, with doorstep gold evaluation and collection, and a processing time of 30 minutes after sanction. With Rupeek, any loan you take for your business is easy, relaxed and quick.

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