Finance for commercial vehicles is readily available today. There are several banks and non-banking financial companies in India that offer commercial vehicle loans. Unfortunately, there are also cases where many borrowers make a wrong decision due to a lack of knowledge and end up regretting it later. Hence, if you are applying for a commercial vehicle loan for the very first time, you also need to understand the mistakes that should be avoided in the process.
Not conducting a due diligence
Today, there are several reputed commercial vehicle loan lenders in the market. Hence, many first-time loan seekers make the mistake of simply choosing the first lender they come across. Instead of doing so, we need to evaluate the terms and conditions of each loan product carefully before making any decisions. Commercial vehicle loan interest rates offered, repayment terms, and cost of borrowing are a few considerations that have to be properly compared and understood before applying for a loan.
Focusing only on the interest rate
Interest rates are an important component of any loan, including the ones meant for the purchase of commercial vehicles. However, simply using the rate of interest as the only criterion to compare loans is not a good idea. The interest rate does not show us the actual cost of borrowing. It can be understood by using the Annual Percentage Rate (APR). The APR includes the interest on the principal, along with other fees levied on the loan, including processing fees and administrative costs. We should compare the APR of multiple loan options to get a more accurate picture of the overall borrowing costs.
Not choosing the right tenure
Opting for longer loan repayment tenure for a commercial vehicle loan may sound appealing as it will make your monthly EMIs smaller. However, we must not forget that with a longer tenure, we may also have to pay more in terms of interest. Hence, as long as the EMIs stay affordable for our business, choosing a longer loan tenure than necessary would not be a smart move.
Many types of businesses may require commercial auto finance. This financing can be availed by any company offering commercial vehicle loans. However, before applying for such a loan, it is prudent to understand the mistakes to avoid in the process. Doing so would help us save extra costs over time.
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