How to Select the Appropriate Repayment Tenure for a Commercial Vehicle Loan?

If your business operates in the transportation or logistics industry, there is a good chance that you have to maintain a fleet of vans or trucks. These commercial vehicles add value to businesses of multiple types by allowing smooth transportation of goods from one place to another. However, while these vehicles can provide a long list of benefits, they are also pretty expensive. Hence, an increasing number of business owners use a commercial vehicle loan to afford such automobiles. These loans are today offered by multiple NBFCs and banks across India.  Commercial vehicle loan interest rates would depend from one lender to the next. Your priority should be to find the lenders offering commercial vehicle loans at the most budget-friendly interest rates, and smartly select the loan repayment tenure to keep the EMI expenses in check.

Flexibility to Select the Tenure

The majority of lenders provide commercial vehicle loans for a tenure of up to 72 months. Borrowers would get the benefit of selecting the tenure as per their convenience and budget constraints. Try understanding the financial position and future prospects of your business, while taking its monthly profits and expenses into account. This would make it easier for you to determine the percentage of your working capital allocated towards loan repayments, without causing financial strain to your enterprise.

Access Your Cash Flow

Prior to choosing the payback period, assess the cash flow of your company. Determine how much you can afford to pay towards the loan each month without experiencing financial hardship by taking stock of your monthly income and spending. While a longer term lowers monthly payments but raises the total interest paid, a shorter tenure results in higher monthly payments but lower total interest costs.

Forecast Business Growth

Think about your projected business growth. A shorter loan term can be reasonable if you anticipate rapid growth because higher revenue could support larger monthly payments. On the other hand, a longer tenure with smaller monthly payments can be wiser if you expect steady but slower growth. Consider your needs for investments in the future. Longer loan terms with reduced monthly payments could free up funds for other important initiatives like fleet expansion, marketing, or employing more employees.

Business owners can use an online commercial vehicle loan EMI calculator to calculate the EMIs for different tenures, and to identify the repayment period EMIs you can comfortably afford.  While loan EMIs can be calculated manually, doing so would be a lengthy and time-consuming process. It would leave room for error as well. Online EMI calculators, on the other hand, provide you with accurate results within seconds. These calculators can be found on the website of any company offering commercial vehicle loans.