Trucks play a vital role in virtually every industry. They help e-commerce businesses in making last-mile deliveries to urban and rural areas, ensuring that products ordered online reach customers in time. Construction companies, on the other hand, use trucks to transport raw materials to the construction site. Companies across the country additionally use trucks to transport goods from factories to distribution centers and retail stores.

While trucks are integral to the operations of several businesses, buying such automobiles is not always financially feasible for small and medium business owners. You would need a large sum of capital to invest in a fleet of trucks. Not all businesses have enough working capital to afford such an investment. This is where commercial vehicle loans can help. There are multiple banks and non-banking financial companies in India that offer commercial truck loans at affordable interest rates. 

Use of commercial truck loans 

Today, many financial institutions in India offer a wide range of financing options that are specifically designed to help people establish and grow their businesses. Commercial vehicle loans are one such financing solution. They allow business owners to get the funds needed to buy as many trucks as they require for the smooth operations of their venture, without having to dip into the business capital.  Even if your business has enough resources to buy multiple trucks, it wouldn’t be prudent to spend a huge chunk of its capital on simply one area. You always must maintain a certain amount of emergency business funds to deal with unexpected circumstances. Rather than using business funds, it is usually smarter to finance trucks for your business.

Truck loans allow companies of multiple types and sizes to buy trucks to improve their mobility and reach. Whether you need trucks for local deliveries, regional distribution or long-haul transportation, adding such vehicles to your fleet can help you explore new markets and cater to a more expansive customer base. Commercial truck loans can be used to buy both brand-new and pre-owned trucks.

Makeup of a commercial truck loan

The basic makeup of any commercial vehicle loan, including the ones meant to buy new trucks, would include the price of the vehicles, the down payment, the interest rate, as well as loan repayment period. For your better understanding, here is the breakdown of each of these components and how it works within the loan:

●      Price of the vehicle: The price of the vehicle purchase would determine your loan amount. Today, most lenders offer high financing coverage for commercial truck loans. You should try to research multiple options available, and particularly compare the features and prices of trucks from multiple brands to get a fair deal. In addition to the price of the vehicle, the number of trucks you need for your fleet will also impact the loan amount. Business owners requiring several new vehicles would invariably require a larger loan amount than someone needing a truck or a bus. 

●      Down payment: The down payment is the sum of money you have to pay upfront towards the purchase of the automobile. Diverse lenders tend to have distinctive down payment requirements. Many lenders today even offer loans without requiring any down payment. However, your priority should be to identify a down payment sum that you can pay without much hampering your business's cash flow. A substantial down payment sum would invariably lower the loan amount, as well as reduce the EMI and the total interest to be paid over the loan term.

●      Interest Rate: The interest is considered to be the payment for securing a loan, and acts as an incentive for the lender to lend out money. Several factors can impact commercial truck loan interest rates, such as the market rate, your credit score, your debt-to-income ratio, loan-to-value ratio, and the policies of the lender. The interest would be paid off as a part of your EMIs. You must compare the interest rates offered by multiple lenders, and try to identify the most affordable one.

●      Repayment tenure: It is the duration you will opt to repay the loan with interest. If you select longer repayment tenure and spread your payments accordingly, your EMI amount will be lower. However, you would pay more as interest payments on the whole. Most lenders offer repayment tenure of up to 60 months for commercial truck loans. To select the appropriate tenure, it would be a good idea to use an EMI payment calculator before applying for a new or used truck loan.

Loan EMI calculators are online tools that help you check out the EMIs you would have to pay for varying tenure options. You can keep adjusting the parameters of the calculator till you arrive at an EMI option that perfectly fits your budget.

Gather necessary documentation

After you have zeroed in on the right lender and tenure, it shall be the time to finally apply for the commercial truck loan.  All lenders ask borrowers to furnish certain important documents in this process.  To make sure that your commercial truck loan application is processed and approved swiftly and smoothly, you should gather the required documentation in advance. The documents needed for commercial truck loans typically include proof of identity, proof of income, bank statements, IT returns, a Copy of the registration certificate and insurance of the new vehicle, and so on. Depending on the lender, as well as the borrower profile, a few additional documents must be required.

Most lenders today understand how important commercial vehicles can be for business operations. Hence, they usually process and disburse commercial truck loans pretty fast.

Wrapping up

Many types of businesses benefit from commercial truck loans. When applying for such a loan, you need to keep its key components in mind, like the loan amount, down payment, interest rate, and tenure, to ensure that its EMIs stay affordable enough for your business.