Today, many Indian banks and non-banking financial companies (NBFCs) offer commercial automobile loans. These loans are designed to make it easier for business owners to buy the commercial vehicles they need for business operations without spending their working capital. 

Whether you need just a couple of trucks for your business or require an entire fleet of vans, a commercial vehicle loan can effectively meet your needs. However, you need to carefully evaluate the loan options offered by each lender and get into their specifics to zero in on the most budget-friendly loan that can effectively meet your financing needs. 

Interest rates

As a borrower, you should start your loan search by comparing auto loan interest rates offered by varied lenders. The interest rates have a huge impact on the EMIs and how much you will be paying for borrowing. Hence, you need to prioritise short-listing the lenders offering commercial vehicle loans at the most affordable interest rates. The interest rates available to you would depend on many factors, ranging from your credit scores to the internal policies of the chosen financial institution. While comparing the interest rates, it is vital to take into account the type of interest rates offered by the lenders as well. 

Most lenders offer commercial automobile loans at flat or reduced interest rates. Thus, it is important to understand how both types of rate arrangements work. In the case of the flat rate method, the interest rate is calculated on the full loan amount for the entire tenure without considering the repayments done through equated monthly instalments. On the other hand, in the reducing method, as the principal gets paid each month, the interest is charged only on the outstanding principal amount.

Loans with reducing interest rates may offer more flexibility to borrowers, allowing them to manage their finances more effectively. As the interest burden decreases over time, you would find it more affordable to pay its EMIs, and the burden on the finances of your company would also go down with time. 

Loan repayment tenure 

After the commercial auto loan interest rates, the most important element to compare and select would be the repayment tenure. Automobile loans generally have a repayment period of 12 to 72 months. Based on the number of years/months you choose to repay the loan, you can calculate the EMI amount to know the affordability of the loan. Today, there are online auto loan EMI calculators available that have made such calculations fairly simple. 

Many borrowers are often tempted to select a longer tenure since the EMIs are lower compared to a loan with a shorter tenure. However, it is vital to note that the longer the repayment period, the higher would be the total interest outgo. You need to identify the sum of money your business can pay every month as EMI and choose a loan repayment period based on that. 

Loan charges

Distinctive lenders may require diverse types of charges on commercial auto loans. These charges can range from Registration Certificate (RC), Collection charges, and Prepayment charges to Stamp Duty, Processing Fee and Late Payment Fee. It is wise to consider such charges before finalising any deal. 

Using a loan EMI calculator 

To simplify the process of comparing multiple loan options, it will be a smart move to use an auto loan EMI calculator. Such a tool can be found on the websites of the majority of NBFCs and banks. You just have to enter the basic loan information into the calculator, like the loan amount, interest and repayment tenure, and the tool will provide results instantly. These online calculators typically do not ask for any personal information to compute the results, and multiple iterations of calculations can be made on the EMI calculator. 

Online EMI calculators typically have a user-friendly interface and allow you to make complex loan calculations in a jiffy. Hence, when using such a tool, you do not have to undergo the tedious process of doing manual calculations to compare multiple loan options. Not only do manual calculations require a good deal of effort and time, but they also leave substantial room for error. Fortunately, online EMI calculators can provide accurate results in just a few moments. 

Wrapping up

Commercial vehicle loans can be of huge help to any business owner who requires certain automobiles like buses, trucks and vans for their business operations. To find the best possible loan option in the market, you need to compare certain vital elements, like the loan interest rate and tenure. This process can be made simpler by using a tool like a commercial auto loan EMI calculator.