Finance is an important aspect in everyone’s life. Common man generally requires finance if he is planning to purchase a new house or car or any other vehicle. Whatever may be as these purchases always require huge amount of money you need to start investing. Here the commercial banks play a crucial role. Nowadays, commercial banks are the medium for common man to purchase these assets. They provide loan facility at the particular rate of interest, depending upon an individual’s eligibility criteria to purchase the vehicle.
Nowadays, apart from commercial banks, many other financial institutions have also started providing these types of loans for vehicle and equipment finance. However, the rate of interest charged by these financial institutions is a bit higher than the commercial banks. But the services provided by these institutions are good enough.
Different types of vehicle finance
Vehicle finance can be done in two ways, which are popularly known as direct lending and dealership financing.
- Direct financing is an option wherein, you approach the bank first, get the documentation done and they will provide you the maximum amount of loan that can be financed to you on the basis of your profile, later on you can visit shops, compare prices and accordingly decide from where you need to buy a vehicle. You get two advantages from this finance basically, first is comparison, wherein you can select shop which is giving you best pricing and other is you can fix your credit terms in advance with your bank.
- Dealership Finance is a state wherein you sign a contract with your dealer, select a car which you need to purchase and agree to pay in certain terms for certain period of time, the dealer then goes ahead and sells the contract to the bank and receives his payment. There are 3 types of advantages of dealership finance, mainly it provides you convenience, there is no requirement for you to go to the bank and do the formalities, secondly it provides you with various finance options wherein you can compare and decide that you want to go with which finance institution. And the last is special programs, it is often seen that customers approaching dealers directly get special discount offers and other offers.
Again, all the above finances are only possible when you have eligibility to pay off the loan and a good credit history as well. If you do not have good credit history, there are chances that you may require a co-signer to provide a guarantee.
Detailed idea about equipment finance
Equipment finance has become common aspect nowadays. It is a type of finance wherein the lender gives the buyer the finance on the basis of the equipment as a security for the finance. Such options are utilized by those business industries wherein taking a loan is a difficult task. In this case if the buyer defaults the payment of monthly premium then the equipment would be taken away by the banks or financial institutions. In this case the amount financed by the lender is generally the equipment value. The amount of finance cannot be more than the equipment value. The main reason behind this is if the buyer defaults then the amount can be recovered from the collateral easily.
Various types of equipments that are given for lease are computers, furniture and vehicles. It is observed that equipment finance at times become cheaper option than the traditional finance. This type of finance enables businesses to direct their cash towards other areas of the business such as developing new custom or working with current customers. Equipment finance also helps in cash flow as regular repayments over a time frame which is a suitable means that the looks healthier than one lump sum being taken out. It is therefore a type of finance that helps keep money within the business rather than being tied up in depreciating assets.