The purpose of a commercial vehicle loan is to finance a heavy-duty vehicle but there are a few things one must know before acquiring such a loan. In the article below, we tell you what all you need to get a commercial vehicle loan and why one should expect scrutiny, also why commercial vehicle interest loan interest rate is higher than what you might expect.
The whole process of going about the loan needed for your heavy-duty vehicle is very complicated, this is because these machines are very expensive. This is the reason why the lender will ask for many things like income proof, business proof, time and experience in the field etc. Various NBFCs & financial institutions provide the opportunity to avail such loans for buying heavy vehicles like truck, bus, van, taxi etc. It is an unsecured loan since it doesn’t need any type of collateral.
In many cases, the borrower’s fault on commercial vehicle loan and the lender is stuck with a vehicle that they have no use for, and heavy-duty machinery has low resale value. Thus with the higher risk involved, there is a higher amount of scrutiny by lenders. Hence, borrowers must have to note and check some important things before applying for the vehicle loan.
But lucky for you, we are here to tell you the ins and outs of the world of commercial vehicle financing and what the lender might ask before approving your loan. Look here for know the important thing you have to check.
Important Things Lender Ask Before Opting For Commercial Vehicle Loan:
Know the Amount You Need
It is wise to know at least a ballpark figure as to how much would you need and what your down payment will look like. This is the first step while applying for the loan. The next step is to consider the repayment options and interest rates as these will also significantly affect how you plan to repay the loan. The last thing to know is the period of the loan. Hence, the borrowers must have the prior knowledge for the amount he wants to borrow for buying the commercial vehicle. So in such case must check the prices and
Set on the Vehicle
You must research on which commercial vehicle you want to buy and be sure of your decision. Pick the one that is in your budget and you will surely be able to maintain it while paying off the loan too. You might want to go with trusted brands and vehicle have ability to work off so that you have a solid footing in your industry to avoid any kind of problems that might lead you to default.
Every lending institution requires different documents for approval of the loan. Here are a few documents that is commonly needed to apply for a commercial vehicle loan are mentioned below
LLCs and Corporations
Proprietorships and Partnerships
Sales and Revenue
Now that the necessary documents are in order here are a few more things that you should be ready with.
Cash Flow Forecast
If you cannot do it yourself you must hire a professional accountant so that he can make a cash flow forecast for you. A well-compiled cash flow statement instils trust and confidence into the minds of the lenders and helps in deciding with your loan request.
3.2 Time and Experience
You must be running your business for at least 2 years before you even apply for a loan. This clears all the causes of concern and presents the lender an image that you will not abandon this project in favour of something more lucrative.
Ideally, you should have a CIBIL Score of at least 600 because below this the rate of interest charged may be too high to operate in the long run. This is also a great time to build a good credit history with the timely repayment of the loan. Timely repayment makes getting another loan in the future very easy. Higher the credit rating able to instant approval of any type of loan because the credit rating describes your ability to repay the loan as faster.
Choose an Alternative Lender
Don’t worry if one lending institution rejects your application fee. Keep your spirits up, revise your application and go to the next lender. With the economic boom, there has been an increase in the number of lending as compared to those available in the 90s.
As you know there are a large number of lending institutions which provide commercial vehicle loans but the requirement is to fulfill the eligibility criteria and documentation. Before availing the loan it is suggested that must check and compare the interest rates, availability, terms and conditions of the loan with another lender in order to choose the best one which suits you.