Monday, 26 February 2018

I Am In Transport Business Can I Get Loan To Buy A Truck?

Every business requires loans to expand its operations. Same is true for a transport business. If you wish to expand your fleet and are looking for funds to buy trucks you can get loans from various financial institutions. Just like home loans and car loans most banks like ICICI, HDFC, Yes Bank and even NBFCs offer commercial vehicle loans.  Mostly people who are engaged in transport business rely on them for financing needs of owning a commercial vehicle. Loans are offered for both new as well as pre-owned vehicles. One can also avail for balance transfer or top up loans.
One needs to fill in the application form and provide several necessary documents. These include proof of address, proof of experience in this field, bank statements of last six months, income tax returns of past 2 years, balance sheet and profit and loss statement of the business, list of vehicles already owned and RC books of the same, transportation contracts etc. After the submission of the required documents, banks take up to seven days to verify the documents and make an approval decision. In most cases, the loan amount is disbursed directly to the dealer.
The commercial vehicle loan amount varies from Rs 1 lakh to 5 crore. It depends on the specific requirement of a particular business. You can get funding up to 100% of the chassis. In case the quantum of loan is high, you may need to bring in a guarantor. Alternatively, you can get a co-applicant. Your relatives in case you are an individual self-employed, your partners in case of a partnership firm or directors in case of a private ltd. company can co-apply with you. Usually, the vehicle itself serves as collateral and one may not provide any additional security. The loan tenure ranges between 6 months to 5 years.
The interest rate varies from 10% to 15%. The financial institution fixes a specific rate depending on various factors. They consider the customer segment (self-employed, partnership firm, corporate) vehicle segment (truck, bus etc.), business turnover and past loan repayment track record (CIBIL score) to determine the rate of interest to be charged. The summary of your past credit experiences is a reflection of your future behaviour. Many banks have a minimum credit score requirement, below which they disapprove the loans. So check your CIBIL report and score before filing a loan application.  A bad score may not allow you to get the best interest rates and loan terms and conditions.
Apart from the interest rate, one must also consider the processing charges levied by the bank. Most banks charge 2%-4% of the loan amount as processing fee. Stamp duty is also dependent on the quantum of funds borrowed. The loan amount is repaid through monthly EMIs. Prepayment of the loan usually attracts a penalty of 2%.
If you have a very good credit score, you may also avail a personal loan to buy the vehicle. The personal loan amount can be used for any purpose that the borrower wishes. The interest rate on these loans largely depends on the past credit behaviour. A high CIBIL score gives one an upper hand while bargaining for personal loan interest rate.
Commercial vehicle loans provide timely credit to transport operators who are either starting off in this field or looking at expanding their fleet of vehicles. A good credit score and experience of at least 2 years in the field and good revenues in business can help you get 100% financing. With no experience in the transport industry, you would require an excellent credit to qualify for the loan. You would need to pay 10-20% of the amount as down payment. With a bad credit history, no collateral and not enough money for the down payment it may be hard to find a lender.


Thursday, 22 February 2018

Do Rich People Have Better Credit Score?

Credit Bureaus have been around in India for more than a decade but despite that, the awareness about them is still not so high. As per a survey done by us at CreditSudhaar, about 53% of the polled sample was not aware about credit bureaus and credit scores, while only 15% knew their own score. Thus it is easy to estimate that there would be many myths that surround credit scores and what impacts and does not impact the score calculation. One such myth is related to one’s income levels and wealth and its impact (if any) on credit scores. Does being rich mean that you would have a better score?
Do Rich People Have Better Credit Score?
Before we discuss the above question it is important to know what impacts the credit score calculation. There are five factors that are factored in when credit score for an individual is being calculated:
Ø  Repayment History
Ø  Utilization Ratio
Ø  Credit Mix
Ø  Credit Length
Ø  Credit Inquiries
The five factors mentioned above in various proportions decide the credit score of an individual. So whether one is rich or poor has no bearing (as it is not amongst the list of factors that are factored in when calculating the score) upon them being on the loan defaulter list or not being there. What will impact your credit score, is how many credit enquiries you make or how long you have serviced a loan and not how much you have in your bank account.
Someone who is wealthier than another person may have a lower score than a person who has lesser wealth. This might be due to the fact that despite being richer, they might not be disciplined enough to pay their dues on time or because they depend too much on their credit card. On the other side somebody who might not have much of a bank balance but manages to pay their due on time, is disciplined enough not to make reckless card usage and credit enquiries will manage to have a higher credit rating.
Rich or poor makes no difference as long as the borrower is disciplined about paying their dues; they keep their old debt, are not reckless with their card usage and have a health mix of secured loans like housing and auto and unsecured ones like personal loans and rolling credit..
Is there a relationship between income and debt?
While as we discussed above there is no relationship between wealth and the credit rating but there is a relationship one’s income and debt. Whenever you apply for fresh debt the prospective lender will consider your income and also your current level of debt before they sanction the loan to you. For some loans their might be clear cut minimum eligibility criteria for the applicant to get a loan sanctioned while for other loans the lender may consider the income levels in light of many other factors for the loan to be sanctioned.
Lenders want to know whether the borrower can service the amount of loan they are seeking with the flow of income. So along with how much they earn is also important to know and also what is the current level of the debt they already have. If the existing level of debt is already high then even with a handsome income level the borrower might find it to service additional debt. Thus generally a debt to income of less than 40% is considered to be optimal if you are looking for any kind of additional debt. This means that not more than 40% of the borrower’s monthly income should go towards paying the EMIs.

When one applies for a credit card then also the card issuing company sanctions the credit limit based on the income levels of the applicant. Thus income does impact how much debt one can have and service; however being rich or poor has no bearing on the credit score.

Wednesday, 7 February 2018

What Is the Eligibility Criteria for 4 Wheeler Loans

Buying a car is more of a necessity these days than a luxury. In the fast moving life of the urban city or a subtle life in the village, Cars are the easier and faster way to commute between destinations.  But not everyone can afford a car. Afford in this case is not only money wise but also maintenance wise. Because, when you buy a car, it’s just not buying a car, as a onetime investment, it needs maintenance at regular intervals. Petrol prices are also on hike every time. But still, you surpass all this and plan to buy a car which is not very expensive. But still, you cannot pay the entire amount at one shot time! And hence, you plan to take a car loan.
Now while thinking of applying for a car loan, you should check a few things before regretting. Whichever loan you think of taking, always check your credit score. A credit score is a number between 300-900 which shows how responsible you are in making the payments. A better credit score will not only help you in getting a loan faster but also would help in getting the lower interest. Also, check if you are not on a loan defaulter list. Suppose, you had taken a loan/s in past, and you were unable to make the payments because of any reasons, and the account is still pending, and not closed, there are high chances that you would be in that list. If you are the one from it, make sure you take the required steps in order to get out of it. Else, it becomes too difficult to first of all get a loan or second of it at a lower interest rate.
Now, Let us check the criteria’s for taking a car loan with different banks.

ICICI
HDFC
Axis
SBI
Age bracket (in years)
23-58

21-60

21-70

21-65

Net Salary/Profit Per Year.
2,40,000

2,50,000

2,40,000
2,40,000
Job / profit criterias

Total employment  or ITR  of 2 years, and Should be In the same job since 1 year
Total employment  or ITR  of 2 years, and Should be In the same job since 1 year
    Minimum 1 year of continuous employment.
Total Employment or ITR Of 2 years


The Above mentioned table gives an idea of car loan eligibility with few of the banks. We can see here that more or less it is similar in all the cases where the age bracket is 21 years or above upto 65 or 70 years. Also the net income in case of a salaried person or self-employed individual who files ITR, should be of 2,40,000 per year. The total employment tenure for salaried person is mostly 2 years and 1 year in the current organization and for self-employed it is minimum 2 years or ITR filed.
While choosing any of the banks to take your loan, always take the following points into consideration.
  1. Amount of down payment you have to make
  2. How much loan amount bank will sanction
  3. Your credit score
  4. Interest rate what bank will offer you.
Like any other loan, the disbursal procedure and documentation would remain the same, like the KYC documents, photograph, income proof, etc. Only with the logic that for a car or an auto loan you need to have a license as well.

Make sure whatever decision you take in buying a car or talking a loan should be the most feasible one for you. It should not burden you at any given point of time in life. Buy the car whose EMI you can pay easily, and take a loan which costs you the least interest rate. Dreaming big is always good, but making an impulsive and non-futuristic decision will not help you in anyway but just add difficulties and burden in your head.