IF you are thinking of all the transportation and allowance fees your small business continues to pay towards transport services, maybe you should think of starting the journey of acquiring a business vehicle.
Maybe when you started this journey, you didn’t have enough money to finance a business vehicle, so you applied for an auto loan.
But now, the monthly installments are becoming harder to pay. So maybe now it’s time to consider finding an alternative that will be cheaper. Why not consider refinancing your auto loan with a small business loan?
What is refinancing?
Refinancing a loan is a process through which you settle a loan by acquiring another loan with better terms and rates than the original loan. For instance, a small business owner has a loan balance with an interest rate of 5%. He seeks another investment that will settle the original balance with an interest rate of 2% and an extended installment period.
In other words, refinancing aims to reduce the pressure of paying a loan.
You should consider refinancing if:
- Your current interest rates are too high, and another lender is offering lower prices with a shorter repayment period.
- You want to consolidate different loans into a single loan.
- Your aim is to reduce the monthly interest and the amount you pay.
- You want to eliminate alteration risk or reduce it.
- You realized you’re unable to make the required monthly payments of your current loan.
Refinancing your car loan with a small business loan
Business vehicles are assets, and in some cases, must-have equipment that helps business owners run different operations. Whether the business car is used for deliveries or transporting employees, it is an essential part of some businesses.
Therefore, some lenders classify business cars as business equipment that can be financed with a small business loan.
So, if your vehicle loan is becoming more of a headache and you need an alternative that won’t cost you an eye, why not refinance it with a small business loan?
Here is how you can refinance it:
- Analyse your current loan. Find out your current interest rates and the loan term that is remaining. Check if the loan has any penalties on its prepayments. The information will help in making the right refinancing decision.
- Determine your vehicle’s current market value. If the value is far beyond what your loan balance totals, then you can go ahead with refinancing. If the value is below that of the loan, it’s better to reconsider all options before applying for another loan.
- Gather any essential documents you might need when applying for your refinancing small business loan. Ensure your business, vehicle and loan information documents are available.
- Shop around for the best small business loan from various lenders until you find the best deal.
- Apply for the new loan after verifying all the requirements and making sure it can be used as a refinancing loan.
- If approved, use the loan to repay your original investment.
- Start paying cheaper monthly installments.
Vehicle loans versus small business loans
A business auto loan attracts an interest rate of between 4% and 18% depending on your credit scores. The repayment period is approximately five years. Some lenders require that you make an initial down payment, which is a percentage of the total amount of the vehicle’s value.
Heavy-duty vehicles have different agreements when it comes to rates and other loan terms.
However, small business loans attract interest rates of around 2.5% to 5%. They have a repayment period of up to 25 years (on long-term loans), depending on the amount you borrow and the lender. You can borrow up to $5 million. No down payment is required.
What loan works better for you?
If you’re suffering the expensive repayments of an auto loan, and you have the ability to apply for a cheaper refinancing loan, don’t wait any longer. Review your documentation and use a small business loan to refinance your current auto loan.