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.

No comments:

Post a Comment