If you are planning to buy a new commercial vehicle, like a truck or van for your business, then a commercial vehicle loan would be a good choice. Commercial vehicle loans are provided by many banks and non-banking financial companies (NBFCs) across India. These loans are used for the purchase of heavy vehicles like buses, trucks, tippers, and transit mixers, along with lightweight commercial vehicles like vans and pickup trucks.
While using a loan to buy commercial vehicles for your business can be a smart move, before signing the loan agreement, you should be aware of some common mistakes made by borrowers. A good understanding of these errors will help you make informed decisions and have a smooth experience throughout the process.
Choosing the First Loan Scheme
You need to do your homework before selecting a commercial vehicle loan. Instead of jumping at the very first loan option you come across, it is imperative to look around and compare the features and interest rates of different loans. Your priority should be to find a commercial vehicle loan with the best interest rate. The lower the interest rate, the lesser you ideally have to pay as loan EMIs. Today, a large number of commercial vehicle loan providers are present in India. Hence, it should not be difficult to identify commercial vehicle financing that perfectly caters to your specific needs and budget constraints.
Opting for a Longer Tenure
Although a longer loan tenure may seem appealing as it ensures lower EMIs, it also means that you shall have to pay more interest payments on the whole. One of the most important things to remember when applying for a commercial vehicle loan is to select the shortest term you are comfortable with. This shall help minimize the outflow of interest. You can always use an online EMI calculator to identify the commercial loan tenure perfect for you, based on your affordability.
Going for Zero Down Payment Offers
Most lenders provide finance up to 100% of the ex-showroom price of commercial vehicles. While this “zero down payment” option may sound tempting, it is not always a smart choice for borrowers. You need to understand that zero down payments invariably mean an increased loan amount, higher EMIs, and a higher outflow of interest. It is a good example of a “less now, more later” scheme where you end up paying more than was necessary. Hence, it is better to pay a down payment for the purchase of commercial vehicles to lower the overall borrowing expenses. You must carefully evaluate the financial standing and budget, and select a down payment amount you can afford without straining your company budget.
Overlooking Loan Processing Fees
Before finalizing a commercial vehicle loan agreement with an NBFC or bank, it is vital to carefully evaluate all associated charges, including processing fees, documentation charges, and any other additional fees. These charges can have a major impact on the overall amount of the commercial vehicle loan. Simply finding a commercial vehicle loan with the best interest rates is not enough. You also need to pay heed to other costs associated with it.
Not Reading the Fine Print
No one likes going through a bunch of documents detailing the terms and conditions of the loan. Due to this reason, many borrowers make the mistake of signing the loan agreement without reading it first. This can land you in a soup!
Skipping a thorough review of the fine print of the commercial vehicle loan agreement can be a grave error. You must ensure you read each of its pages properly and understand the terms and conditions, including potential hidden fees or penalties. In case you have any confusion or queries, you must enquire from the lender at once. Before signing the dotted line, you must know what exactly you are signing up for.
Avoiding Refinancing Options
Refinancing commercial vehicle loans is overlooked by many borrowers. However, this can be a pretty valuable option in case better terms become available down the line. Failing to explore good refinancing opportunities can cause you to miss out on potential savings for your business. Keep in mind that refinancing can help you secure a more favorable interest rate for your commercial vehicle loan, ultimately reducing overall costs. Refinancing is especially an ideal choice for borrowers stuck with commercial vehicle loans with high interest rates.
By steering clear of these common commercial vehicle loan mistakes, you will be able to have a smooth and financially responsible commercial automobile buying experience.
Author bio: The author has been working in the financial industry for more than two decades. He has excellent experience in writing detailed and factual finance-related content. He provides financial advice to people through blogs as well as for some other sites and magazines.
