The requirement for commercial vehicles has been on a substantial rise in the past few years. With the advent of globalization, online markets, and commercialism, hubs of commercial vehicles have been formed.
From tippers to trucks and limousines to cabs, commercial vehicles are in demand. As an aspiring or established self-employed owner-operator of commercial vehicle services, you must have realized the need for third-party financing.
Whether you plan on procuring a cab to yourself or are eager to develop and grow a fleet, you'd want financial aid. Here, the question arises – where to seek financial aid from? There are two options – commercial vehicle financing NBFC, or commercial vehicle financing bank.
We will here give a breakdown of the kind of institutions you can fix a financial loan deal from. Through the list, you will be able to decide what works best for you.
Commercial Vehicle Classification
Before we jump into the sources of financing, you must be clarified about the classification of commercial vehicles. This is necessary because the vehicle grading is crucial while raising commercial vehicle financing NBFC or bank sourced.
In simple words- commercial vehicles are the vehicles that are used for commercial purposes. They are the vehicles that produce revenue to the owner while they’re in use. The eight kinds of commercial vehicles are divided into three categories – light-duty, medium-duty, and heavy-duty.
Light-Duty Vehicles
This category includes trucks of classes 1, 2, and 3. In general terms, these vehicles have a GVWR of 0-14,000 pounds. Vehicles that qualify for the light commercial vehicle category include vans, cabs, and three-wheelers.
Medium-Duty Vehicles
This category includes vehicles of classes 4, 5, and 6. In general terms, these vehicles have a GVWR of 14,001-26,000 pounds. Vehicles that qualify for the medium commercial vehicle category include pick-up trucks.
Heavy-Duty Vehicles
This category includes vehicles of classes 7, 8, and 9. In general terms, these vehicles have a GVWR of over 26,001 pounds. Vehicles that qualify for the heavy commercial vehicle category include the heady weight 18-wheeler highway trucks, cement rollers, tippers, etc.
Where to Shop for Commercial Vehicle Loans?
There are numerous subtle differences between bank commercial loan financing and commercial loan financing NBFC. Both financial institutions cater to all kinds of borrowing needs and offer lucrative deals. Let’s get into a detailed explanation of the differences between the two.
Key Differences Between NBFCs and Banks
Banks are recognized by the country’s government. Their interest rates, policies, and other schemes fall under the regulation of the government, maintaining an equanimity.
NBFCs, on the other hand, are independent bodies that are regulated by government laws, but not the government itself. This gives the NBFCs autonomy and the ability to reduce or increase their interest rates at their own will.
Another thing to note is that banks are permitted to be involved in clients’ settlement and payment systems. Bank account holders are allowed to send and receive money. NBFCs, on the other hand, are not permitted to participate in such activities. They can not issue cheques or drafts, and clients cannot send or receive money from other sources.
As for seeking commercial truck financing, both banks and NBFCs are permissible to tender loans.
NBFCs offer durable consumer loans that are altered and customized according to individual needs. They allow easy repayments and follow quick procedures. Banks, on the other hand, while having a larger variety of loans to choose from, are rigid in their procedure. The differences in the processes are subtle but significant.
Interest Rates
Bank loans generally have floating interest rates. They are directly involved with the microeconomic regulations of the country. Therefore, when it comes to flexibility of interest rates, there is very little that banks can do.
Commercial truck financing NBFC is better in this regard. Since their interest rates are not regulated by a governing body, they can offer much flexible interest rates. Housing Finance Corporations (HFCs) follow the same flexibility.
With greater freedom to adjust interest rates, NBFCs are ideal for those who can benefit from no to extremely low-interest-rate policies. Commercial truck financing NBFCs also cater to those owner-operators who are not eligible to opt for bank loans.
Loan Eligibility
Banks have a stricter eligibility criterion than NBFCs. While many factors will deem someone ineligible to enjoy a bank loan, NBFCs alter interest rates and other policies according to the client’s needs, credibility, and capital resources.
Some clients might only be eligible for smaller loans raising by the banks. These clients can approach a commercial truck financing NBFC to avail of a customized loan offer. This helps small business owners to raise higher loans than possible through banks.
Credit Score:
Banks and NBFCs offer the best possible interest rates according to your credit score. This means that the higher your credit score, the lower the interest rate. Whereas, the lower your credit source, the higher your interest rate.
However, with the flexibility that a commercial truck financing NBFC offers, clients can get better interest rates than they would at a bank.
To understand this, let’s look into an example. A bank might offer an interest rate of 8.5% to someone who has a high credit score of 800. The bank might totally reject a loan application by someone who has a credit score lower than 600. However, an NBFC might be able to give an interest rate of 9% to someone who has a low credit score of 650.
Stringent Paperwork
Banks have to follow extremely strict procedures that can lead to tedious and lengthy paperwork. NBFCs, on the other hand, are much more lenient about paperwork. If you're in need of a quick loan procedure, NBFCs are ideal.
The Verdict
A commercial truck financing NBFC is a wonderful option for anybody. They can be approached regardless of their credit score or the amount of money that needs to be raised.
Since proper financing is the key to a healthily growing business, take measure steps, and see the outcomes that you desire come to life.
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