Commercial vehicles are the source of livelihood for many across the country, no matter whether they use these automobiles to transport goods or ferry passengers. The commercial vehicle segment covers a wide range of automobiles, including goods-carrying vehicles and passenger-carrying vehicles. Vehicles that are primarily used to transfer goods from one location to another include trucks, tempos, lorries, and vans. Taxis and buses, on the other hand, are passenger-carrying vehicles.
A Commercial Vehicle Loan is crucial for businesses requiring transportation assets. It offers financial assistance to acquire vehicles, expand operations, and improve logistics. By spreading the cost over time, businesses can conserve capital, maintain cash flow, and access better equipment, enabling growth and enhanced efficiency in goods or services delivery.
Commercial Vehicle Loan
Many types of businesses need commercial vehicles for their operations. But these vehicles can be quite costly, making it difficult for businesses to purchase new trucks or vans, and upgrade their fleet. Buying commercial vehicles solely with your working capital can considerably deplete your business funds. Hence, it would be a much smarter move to apply for a commercial vehicle loan to finance this investment. There are many banks and non-banking financial companies present across India that offer commercial vehicle loans at affordable interest rates.
Common Automotive Loan Terms You Should Know
Here are a few basic auto loan terms you should know about before you apply for a loan to purchase commercial vehicles for your business:
- Down payment: A down payment implies the money you are willing to pay from your pocket for the purchase. The bigger your down payment, the lesser the amount of money you have to borrow. Ideally, your down payment should equal at least 20% of the purchase price for new commercial vehicles and 10% for pre-owned ones. Selecting the right down payment for a commercial vehicle loan involves careful consideration of the financial situation of your business and the terms of the loan. You need to determine how much you can comfortably allocate towards a down payment without straining your working capital.
- Interest rate: The interest rate of the loan reflects how much EMIs you have to pay for the debt. Every instalment you pay would partly go towards interest and partly toward the balance of the loan principal.
- Annual Percentage Rate (APR): The APR of a loan implies the total cost to borrow the money, including interest and other fees. Automotive loan expenses included in the APR are often known as prepaid financing charges. You need to examine the interest rates and APR before selecting a loan option.
- Principal: The principal of a loan implies the amount you are borrowing to pay for the car, as well as to cover taxes and fees. The loan principal does not include interest charges
- Term: The loan repayment term is the time you have to pay back the loan. As the price of commercial vehicles goes up, the average auto loan terms are getting longer. Longer term loans typically mean lower EMIs, but also cost you more in the long run in regards to interest payments.
- Total cost: This is the full amount you will have to pay to buy commercial vehicles. This figure would include your down payment, the value of any trade-in, principal, interest as well and fees.
After you have gained a good understanding of the basic components, you can use an auto loan EMI calculator to identify the perfect loan option as per your business needs.
What is a Loan EMI Calculator?
A loan EMI calculator is an online tool that allows you to accurately estimate the EMI amount you will have to pay towards the loan. The EMI includes both the principal amount (the loan amount) and the interest amount, spread over the loan's repayment tenure.
You have to input the following information into the calculator:
- Loan Amount: The total amount you are borrowing to purchase commercial vehicles.
- Interest Rate: The annual commercial vehicle interest rates charged by the lender.
- Loan Tenure: The number of months or years over which you will repay the loan.
Using the input parameters, the calculator performs a complex mathematical formula to calculate the Equated Monthly Instalment (EMI).
You can repeat this calculation as many times as you want with varying loan terms to find an option well-suited to your needs.
Auto loan EMI calculator is a free and easy-to-use tool. The top benefits of using this calculator are:
- Quick estimation: An EMI calculator is one of the most effective tools to promptly estimate the EMI amount before applying for a loan. It allows you to assess whether the loan fits within your budget or not.
- Comparison: You can adjust the loan amount, interest rate, and tenure as many times as you want and compare varying loan options, to make a well-informed decision.
- Budget planning: A loan EMI calculator is highly helpful in planning your monthly budget by providing a clear understanding of your expected loan repayments.
A loan EMI calculator is especially useful in selecting the appropriate tenure for commercial vehicle loan repayment.
Selecting the Ideal Loan Repayment Tenure
Lenders usually offer repayment tenure of up to 72 months for commercial vehicle loans. Longer tenure would result in lower monthly payments but higher overall interest costs. On the other hand, a shorter tenure has higher monthly payments but lower interest expenses. It is prudent to analyse the financial situation of your business with care to zero on the ideal loan repayment tenure.
You must carefully review the income, expenses, cash flow projections, and existing debts of your business to gauge its financial capacity to comfortably manage monthly loan payments. Analysing the working capital, the monthly budget, and projected cash flows of your business can help you to identify the EMI amount your business can afford to pay without straining your business operations or affecting other essential expenses.
Applying for a commercial vehicle loan can be a smart move for any person who needs to purchase new trucks, vans, lorries, busses and so on, for their business. However, as many lenders offer such loans, you need to do your research before selecting any loan option. Using an auto loan EMI calculator and analysing the financial standing of your business would be of huge help in enabling you to make the right choice.
