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| October 4, 2021

How to Get Commercial Vehicle Loan in India?

A commercial vehicle loan makes it very convenient for business entities and individuals to purchase commercial cars or other vehicles. Whether it is a bus, truck, tanker, or light commercial car that you mean to employ as a taxi, commercial vehicles are a vital element of our economy today. From goods deliveries to daily commutes, commercial vehicles facilitate ease and convenience for a lot of sectors. Business owners who are just setting up or are planning to expand their operations generally put in a lot of thought into researching the specifications, features, maintenance costs, etc. of different commercial vehicles, so they can make an informed purchase decision that is beneficial in the long term. Although several vehicle manufacturers offer in-house facilities for finance, you will find that these options often do not have much room for customisation. For being able to choose low commercial vehicle loan interest rates or flexible payment and tenure options, one should ideally put in their own research to look around for the right types of commercial vehicle loans. Another instance where you will need to put in some effort to find the best option is when you need to avail a loan for a used commercial vehicle. There is no manufacturer directly involved here and you cannot depend on the availability of default loan options either.

Your Guide to Commercial Vehicle Finance

What is a Commercial Vehicle Loan?

Numerous financial institutions in the country, like Muthoot Finance, offer customised financial solutions for the purchase of vehicles that are to be used for business and commercial purposes. These finance solutions can be customised to suit the needs of the applicant and can be used to purchase any type of commercial vehicle. Interest rates for these loans are generally quite affordable, and they also come with fast processing and easy approvals, making them the best option for purchasing commercial vehicles.

Application Process:

  • Search for the best loan offer based on the interest rate, lender reputation, prepayment policies, etc.

  • Check your eligibility

  • Fill an application form (can be done online as well as offline)

  • Furnish required documents

  • Provide the details of your guarantor (if required)

  • Wait for the lender’s evaluation of your profile and documents

  • Loan disbursal

Here’s more information on commercial loans that can help you ensure a smooth application process:

Who Can Avail Commercial Car/Vehicle Loans?

Financial institutions offer loans to a broad array of customers with diverse profiles to facilitate the purchase of commercial vehicles. Individuals, fleet owners, proprietorship and partnership firms, trusts, societies, Public and Private Limited companies, captive customers and transporters, business entities, and educational institutes are considered to be eligible for these loans.

Sometimes, financial institutions may also offer special schemes like lower interest rates on commercial vehicle loans for first-time buyers or fleet owners.

Types of Loans Available for Commercial Vehicle Purchase

Commercial loans can be availed for the purchase of any type of commercial vehicle – from a taxi to a truck. However, based on the type of commercial vehicle you finance, the loans can be broadly classified into:

  • New Commercial Vehicle Loan: Offered for the purchase of new commercial vehicles, this type of loan provides up to 100% financing on the chassis, while some lenders also provide additional funding for the body construction, based on the applicant’s eligibility.

  • Used Commercial Vehicle Loan: Offers finance for a second-hand commercial vehicle that is up to 15 years old. Most lenders offer up to 90% of the vehicle’s market value as funding.

  • Refinancing Commercial Vehicles: Interest rates for commercial vehicle loans vary from lender to lender. Refinancing can be opted for in cases where you get lower rates for an existing loan to reduce the EMI burden, or you can get additional funding for a vehicle based on your eligibility, or you can refinance free vehicles to meet capital needs.

Eligibility Criteria

For New Vehicles:

  • Salaried Individuals: More than 2 years of employment stability.

  • Self-Employed: At least 2 years of business experience.

  • Private/Public Limited Companies, Partnership Firms, Associations, Trusts, Societies, etc.: Should have been in existence for at least 2 years.

  • Fleet Operators/Existing Vehicle Owners: 1-3 years vehicle ownership proof of at least 1-2 commercial vehicles.

  • Residential stability of at least 2 years (lesser stability will subject the borrower to additional terms and conditions.

  • A guarantor may be required in the case of first-time buyers and fleet owners.

For Old Vehicles:

  • 3-5 years of relevant experience (based on individual profile).

  • At least 1 year of ownership of minimum 2 commercial vehicles.

  • At least a 1-year track record of repayment for commercial vehicles.

Commercial Vehicle Loan Interest Rates

Interest rates for commercial vehicle loans generally range between 10% pa to 15% pa but may vary significantly based on the vehicle being bought and the profile of the applicant. Once the documentation submitted by the applicant has been evaluated, the lender will confirm the final interest rate that they will charge. If you are applying for finance for a second-hand commercial vehicle, the interest rate will be different as compared to that for a new vehicle.

Documentation for a Commercial Loan

If you are applying for a commercial loan, documentation will mainly include:

  • Filled application form with photograph

  • 2 passport-size photographs

  • A cheque for the processing fee

  • KYC documents*

  • Income proof*

  • Proof of experience (relevant documentation based on profile)

Other documents that may be asked for, depending on the applicant’s profile and the lender’s requirements, include:

  • Proof of existing vehicle ownership

  • Details and valuation report of the vehicle

  • Copy of the RC and insurance of the vehicle

  • Fleet list details (for fleet owners)

  • Trade references

  • Proof of property ownership (for farmers)

  • Partnership deed (MOA/AOA) proprietorship declaration, board resolution, audited financials of the last 2 years (for entities like trusts, societies, private/limited companies, partnership firms, etc.)

* Documentation acceptable under KYC and income proof for commercial vehicle finance applications:

KYC Documents

  • Age proof (any one of these): Aadhaar card, PAN card, voter’s ID, passport, driving license.

  • ID proof (any one of these): Aadhaar card, voter’s ID, passport, driving license.

  • Proof of residence (any one of these): Rent agreement, passport, voter’s ID, ration card, utility bill, sales tax certificate, trade license.

  • For signature verification (any one of these): Driving license, PAN card, government ID card (for govt. employees), registered sale deed.

Income Proof Documents

  • Salary slips of the last 3 months

  • Bank statement for the latest 6 months

  • Form 16

  • Updated ITR for the last 2 years

  • Copy of official ID

Some Important Aspects of Commercial Vehicle Finance That You Should Know About

  • Your Credit History: Unlike most loans, commercial loans do not require a credit score and history check for the applicants.

  • Processing Charges: Lenders charge a small non-refundable amount as a processing fee for the loan. This fee can range from 2% to 4% of the amount applied for.

  • Loan Margin: Applicants can get financing for up to 100% of the vehicle’s chassis. The loan amount that is approved however depends on the applicant’s profile.

  • Prepayment: Part-prepayment is generally not allowed but after a pre-determined time period has passed (generally 6 – 12 months), borrowers may be allowed to repay the loan, with a prepayment penalty applied on the remaining amount. The exact policy for prepayment will vary with different lenders.

  • Collateral: In most cases, commercial loans do not require security or collateral, as the vehicle bought using the loan is hypothecated to the lender till the loan has been repaid. However, based on the applicant’s profile, a guarantor or co-applicant may be needed.

  • Resale: Until the entire loan has been repaid, borrowers will not be able to sell the vehicle in question. After clearing the outstanding amount, a No Objection Certificate (NOC) is issued by the lender and the vehicle can be sold only after it has been received.

  • Tenure: Commercial loans can be taken for a tenure ranging from 1 to 5 years. Applicants have the freedom to choose a tenure based on their repayment capabilities.

  • Low Interest Rates: If the profile of an applicant matches the eligibility criteria put forth by the lender perfectly, they will be able to avail lower interest rates.

Avail customisable plans and attractive interest rates on your commercial vehicle loan at Muthoot Finance. Known as the No. 1 Most Trusted Financial Services Brand in India (as per the Power of Trust TRA Brand Trust Report), Muthoot Finance is focused on providing the best financial services to our customers.

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