Commercial Vehicle Loan Vs Bike Loan
Vehicles can be highly convenient and efficient for personal as well as business purposes. In the case of daily commutes, touring, transporting materials, or delivering parcels, an automobile can provide great assistance. Be it a car, two-wheeler, tractor, or truck, you can purchase any of these with the right loan plan.
In such cases, the credit option you can opt for depends on multiple factors like the use of the vehicle, the budget, and your income type. If a businessman wishes to provide their employee with a two-wheeler to make faster deliveries, what type of loan should he take? One may get confused between commercial vehicle loans and bike loans. Here is a small guide to help you understand the difference between the two and make an informed decision.
What is a Commercial Vehicle Loan?
A commercial vehicle loan is usually offered to self-employed individuals, businesses, partnerships, trusts and organisations to help them purchase automobiles to meet their business needs. This includes vehicles like trucks, tankers, trailers, bikes, cars, and so forth.
For example, if you are a cosmetic brand owner, it is essential to transport the required materials from your inventory to your small factory for production. This can be made easy with the help of tempos or trucks. You can purchase these with the help of a commercial vehicle loan.
The interest rates of these loans are usually higher than that of consumer vehicle loans and typically range between 10% to 24% per annum. This is because the repayment risks are higher in the case of businesses. However, it is advisable to use a bike loan EMI calculator to calculate your monthly bike EMI. Meanwhile, the tenure of these credits is also shorter than those of the standard car or bike loan. These are of 3 different types.
New Commercial Vehicle Loan - This loan is for those looking to purchase new commercial vehicles. Usually, a lender will offer up to 100% funding of your vehicle's base frame or chassis value.
Old Commercial Vehicle Loan - Under this, you can borrow money to purchase old and used commercial vehicles. Herein, the lender offers you 90% funding on the depreciation grid value or the used vehicle’s value.
Commercial Vehicle Refinancing - Lenders may give you a loan on a vehicle which may be debt-free or take over the existing loan and provide you with additional finance. This option can help you either lower your current EMIs or get access to cash to get extra working capital.
What is a Bike Loan?
A bike loan is a financing option to borrow money to buy any two-wheeler. Be it for daily commutes or going for long rides during vacations, you can purchase the automobile you need by applying for a bike loan. The interest rate on bike loans usually start from 6.85% per annum.
Generally, you are offered a loan of up to 95% of your bike’s value in India. You are usually required to pay the remaining 5% in the form of down payment, with additional RTO charges, registration fees, road tax, and so on. Meanwhile, some lenders may also offer up to 100% funding of the vehicle’s on-road value.
Let’s compare the two financial products to understand the difference:
Commercial Vehicle Loan | Bike Loan | |
Usage | Typically taken to purchase automobiles to meet business requirements. | Typically taken to purchase a two-wheeler for commuting or for leisure purposes. |
Types of Vehicles | You can buy trucks, trailers, buses, bikes, cars, and tankers with this loan. | You can buy bikes and scooters with this loan. |
Interest Rates | Generally, commercial vehicle loan interest rates start from 10% per annum | Generally, bike loan interest rates start from 6.85% per annum |
Funding | Funds up to 100% of your new vehicle’s base frame and up to 90% of a used vehicle’s depreciated value | Funds up to 95% of the bike’s value. |
Credit Score | Usually, there is no credit score requirement. This means that you can take this type of loan even with a zero score. | Usually requires you to have a good credit score. Your creditworthiness can even help you get loans at lower interest rates and more favourable terms |
Eligibility | Self-employed individuals, businesses, partnerships, and organisations | Individuals that are self-employed, salaried or professionals can take this loan |
Eligibility Criteria:
Aside from the aforementioned criterion, let us have a look at some common eligibility requirements for both these loan products.
Commercial Vehicle Loan
Institutions looking to borrow the amount must be functioning for at least 2 years
Fleet operators and similar existing vehicle owners need to show proof of owning one or two commercial vehicles over a span of 1-3 years
Borrowers need to provide audited financials of the last 2 years
The customers need to have minimum residential stability of 2 years
Bike Loan
Should be at least 18 years old
If salaried - employed for at least a year
Minimal income requirements as per lender
Should be residing in the city for at least a year
Good credit score of approx. 700. It may differ from lender to lender.
Documents Required:
Now that we have understood the eligibility criteria, let’s also look at the documents you may be asked to submit when applying for these loans.
1. Commercial Vehicle Loan
Identity proof
Address proof
KYC documents
ITR of 2 years with audited balance sheets, profit & loss account, and computation of income
List of presently owned vehicles and copies of their Registration Certificates (RC)
Bank statements of the last 6 months
2. Bike Loan
Address proof - PAN card, Aadhar card, passport, voter ID and Driving license
Identity Proof - Utility bills and government-issued documents
Income Proof - Latest salary slips, audited financial statements, ITR, bank statements, and so forth
With the distinction between the two loans clear, opt for the right kind of financing. If you need to purchase a tanker or bus to fulfill your business needs, get a commercial vehicle loan. This option can be very useful for delivery, logistics, and freight businesses.
On the other hand, if you are looking to purchase a bike for your personal use, a bike loan can help. Go on that long road trip with your new touring bike or commute with efficiency and convenience with a street bike.
Whatever your need, get a bike loan with favorable interest rates and tenure. Make the most of your financing options to upscale your business and uplift your life.