InvestorQ : What are the things I must keep in mind when taking a commercial vehicle loan?
leah Diaz made post

What are the things I must keep in mind when taking a commercial vehicle loan?

simran Kaur answered.
3 years ago

We have often heard about home loans, car loans and personal loans and from the name of the loan we know what purpose it serves. However, very few of us know about commercial loans. Let’s try to understand the purpose of these loans, documentation process and who can avail them.

Commercial vehicle (CV) loans are usually taken by individuals, partnership firms, proprietorship firms, HUF (Hindu Undivided Family), trusts, societies, self-employed, businessmen and private and public limited companies for their financing needs for owning and running commercial vehicles.

The borrowers of these loans are usually engaged in the business of transportation. CV loan options are available for buses, tippers, transit mixers or any other heavy, light or small commercial vehicle. A commercial vehicle loan can be taken for a variety of commercial vehicles, which may be used at different locations.

Banks such as HDFC Bank, ICICI Bank, DCB Bank and Yes Bank among others provide such loans. Non-banking financial companies (NBFCs) such as Reliance Commercial Finance, Shriram Transport Finance Limited, Fullerton India provide loans, etc.

While loans are sanctioned for the purchase of a new commercial vehicle, banks also offer loans for pre-owned vehicles. Borrowers can also avail of a top up on existing loans subject to conditions.

Loan process

The borrower—who wants to avail of a commercial vehicle loan—has to fill in the application form and provide the necessary documents. The documents include proof of address (passport, ration card, voters ID), proof of experience in the relevant area, track record of past loans (if availed) and six months bank statements of the last six months. The borrowers would also need to submit two years income tax returns, audited balance sheets and profit & loss account statements. List of owned vehicles along with the copies of RC (registration certificate) books.

Some banks may also ask for transportation contracts for higher quantum of funding. In some cases, banks may ask also for a personal guarantor.