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Credit Score for Commercial Goods Vehicle Finance

A strong credit score can indicate sound financial health and boost your chances of obtaining loans at favourable terms and lower interest rates. However, some lenders may still consider your application even if you have little or no business credit history or poor personal credit.

To qualify for commercial goods vehicle finance, you may need to meet specific criteria, such as having a minimum credit score of 670. You must have all relevant documents ready, such as business licences, tax returns and bank statements to speed up the Shriram Commercial Goods Vehicle Finance application form process.

Minimum Credit Score for a Commercial Goods Vehicle Finance

The minimum credit score required for commercial goods vehicle finance varies depending on the lender and the type of financing. Some lenders may offer 100% finance for business owners even at lower personal credit scores, while others require a minimum credit score of 670 or higher.

Importance of Credit Score for a Commercial Goods Vehicle Finance

Credit scores are crucial in determining whether a business is eligible for commercial goods vehicle financing. Lenders use it to check the borrower's financial capability to decide the interest rate they will charge. 

A credit score above 700 shows that the borrower is financially capable and has a positive track record. On the other hand, a credit score below 600 shows that the borrower presents a higher risk to the lender. The borrower may be charged a higher interest rate or cannot get the loan in such cases.

Here are a few factors that indicate the importance of credit scores for commercial goods vehicle finance:

Interest rate

The interest rate for commercial goods vehicle finance depends upon the credit score. For instance, if you have a better credit score, you can effortlessly obtain finances and get a chance to negotiate the interest rate with the lender. A low credit score, on the other hand, can cost you higher interest rates and influence the lender to provide you with finances on their terms and conditions.

Loan approval

The lenders use credit scores to check how much risk they undertake when lending money to you. A good credit score indicates that you are more likely to repay your loan and helps you get commercial goods vehicle finance at lower interest rates. However, a low credit score indicates that you are a greater-risk borrower.

Loan amount

Credit score plays an important role when you apply for a loan. After evaluating your application form, if the lender finds your credit score is above the minimum requirement, you may be allowed to borrow a higher loan amount. In case of a low credit score, however, your borrowing capacity will be limited.

Loan terms

Your credit score may influence your loan terms and conditions. For example, if a person has a good credit score, they could acquire a loan at a low interest rate, on less down payment for a long period.

Eligibility Criteria

The eligibility criteria for commercial goods vehicle finance differ depending on the lender. Most lenders, however, will require the following: 

  • A good credit score

  • Business documentation

  • Personal credit and finances review

  • PAN card

  • Aadhaar card

How Does Credit Score Affect Commercial Goods Vehicle Finance?

A good credit score is crucial to obtaining commercial goods vehicle finance. There may be a negative effect on your ability to get the finances if you do not have a good credit score. Here's how credit score affects commercial goods vehicle finance:

Loan Opportunities

A better credit score increases your chances of obtaining commercial vehicle financing. Lenders may be ready to offer you easy terms and conditions and lower interest rates if you have an excellent credit score.

Loan Approval

Lenders consider your credit score to decide whether or not to approve your commercial goods vehicle loan application. In some cases, a low credit score may make it more difficult for you to obtain a loan. Lenders may still give commercial vehicle loans to business owners with bad credit. However, interest rates may be higher.

Personal Guarantee

Lenders may request a personal guarantee for commercial vehicle loans in specific instances. It implies that if your company defaults on the loan, the lender has the right to repossess the vehicle, which may impact your credit history. However, the negative impact on your credit scores will be minimal if you repay the loan with personal assets.

Interest Rates

The interest rates you pay for commercial vehicle finance can be influenced by your credit score and financial profile. Commercial vehicle loan interest rates generally vary depending on criteria such as your credit score, loan amount, and repayment period. A good credit score and a strong financial position may help you get lower interest rates. On the other hand, if you have a lower credit score, you are likely to pay higher interest rates.

The Benefits of Borrowing a Commercial Goods Vehicle Finance to Improve Credit Score

Availing commercial goods vehicle loans can improve a business owner's credit score, but it depends on the individual's financial circumstances and credit history. Here are some benefits of taking a commercial goods vehicle loan to improve your credit score:

  • Flexible repayment terms :Typically, commercial vehicle loans have a repayment period of up to 5 years. Borrowers benefit from reduced EMI amounts, allowing them to pay off the equivalent monthly instalments (EMIs) without hassle.

  • No credit score needed: Commercial vehicle loans do not always require a credit score. Borrowers with negative or no credit history can also obtain commercial vehicle finances and work towards building their credit scores with timely repayments.

  • Lower interest rates: As lenders can collect the debt value even if you default, they charge lower interest rates on commercial vehicle loans.

  • Collateral: The vehicle acts as collateral, making it less risky for lenders and potentially leading to better loan terms.

  • Easy documentation: Commercial vehicle loans have a simple and easy documentation process. Borrowers can upload all necessary documents online without having to visit the bank.

Overall, commercial goods vehicle finance can be the best alternative for first-time buyers or loan seekers who wish to build creditworthiness or arrange financing for their business. However, it's important to read the loan's terms and conditions thoroughly and ensure it fits the company's financial needs well.

How to Get a Higher Credit Score with Commercial Goods Vehicle Finance?

Here are some ways to get a higher credit score with commercial goods vehicle finance:

  • Ensure you make regular payments: Paying off your EMIs on time can help you improve your credit score.

  • Pay off other debts: You can also increase your credit score by paying off other high-interest debts. If you have additional debts, you might consider using your commercial goods vehicle finance to combine your debts and pay off the rest instantly.

  • Ensure your credit report is accurate: Credit report errors can hurt your credit score. So, keep a check on your credit report to avoid any future disputes or discrepancies on it.

  • Maintain a favourable credit utilisation ratio: The credit utilisation ratio is the amount of credit you use compared to the total available credit amount. To maintain a high credit score, keep your credit utilisation percentage under 40%.

Maintaining a Higher Credit Score with Commercial Goods Vehicle Finance

Maintenance of a higher credit score is crucial when applying for commercial goods vehicle finance. Here's how you can maintain a good credit score:

Pay your bills on time

A delay in payment of your bills can decrease your credit score. So, it is critical to pay bills on time to keep a good credit score.

Keep credit usage low

Credit utilisation is the amount of credit you use compared to your credit limit. Using the minimum available credit amount can help you maintain a high credit score.

Monitor credit reports

Checking your credit reports regularly might help you identify errors or fraudulent activities that can harm your credit score.

Keep a good credit history

A good credit history helps you build a decent credit score. Thus, it is important to avoid defaults and errors by making timely loan repayments.

Use credit wisely

Using credit wisely will help you maintain a sound credit score. As a result, it is critical to avoid maxing out credit cards or incurring excessive debt.

Conclusion

Credit scores are important when determining eligibility for commercial goods vehicle financing. Borrowers with a decent credit score are more likely to be given loans at lower interest rates. However, borrowers must investigate lenders' terms and conditions before applying for commercial vehicle finance to get the best loan options for their business.

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FAQs

Is it easy to get commercial goods vehicle finance?

Getting commercial goods vehicle finance can be easy or difficult depending on your specific circumstances, such as your credit score, years of business, annual revenue, etc.

What credit score is good for commercial goods vehicle finance?

A good credit score for commercial goods vehicle finance is above 670. A score of less than 670 isn't bad unless it's much less than 670. Even if your credit score is 620 or 640, you can still find good financing options.

What is the interest in commercial goods vehicle finance?

The interest rate for commercial vehicle financing might differ based on certain factors, such as credit score, annual revenue of your business, debt-to-income ratio, down payment amount, etc. The average interest rate on commercial vehicle finances ranges from 4% to 12%.

How does a credit score affect commercial goods vehicle finance?

A good credit score helps the borrower obtain finances, negotiate lower interest rates and get more favourable terms on the loan.

Where can I check my credit score for commercial goods vehicle finance?

Many banks, NBFCs like Shriram Finance and credit bureaus offer free credit score checking services. You may check and verify your credit score by visiting Shriram Finance website or by using Shriram One App.

When should I apply for commercial goods vehicle finance based on my credit score?

It's important to shop around for the best rates and terms and to apply for commercial goods vehicle finance when you have a good credit score and a strong financial profile.

Why is a good credit score important for commercial goods vehicle finance?

A good credit score reflects the financial soundness of a borrower. It may help you obtain finances easily at lower interest rates.

Who determines the credit score requirements for commercial goods vehicle finance?

Each lender has their own credit score requirements for commercial goods vehicle finance.

What factors are considered in calculating a credit score for commercial goods vehicle finance?

The factors considered in calculating a credit score include your payment history, credit history, credit utilisation, credit inquiries, etc.

How can I improve my credit score for commercial goods vehicle finance?

You can improve your credit score by paying your debts and bills on time, keeping a watch on your credit report for errors and reducing your debt-to-income ratio.

Where can I get commercial goods vehicle finance with a low credit score?

Few lenders, especially NBFCs, can provide commercial goods vehicle finance with a low credit score.

Why do lenders use credit scores for commercial goods vehicle finance?

Credit scores are an important factor. They help lenders assess the financial responsibility of the borrower, determine the risk level and predict repayment behaviour when evaluating commercial goods vehicle finance application forms.