What you need to know about van loans for business use
Van loans and finance for business use
If you have a small business you may find that you need some sort of van in order to be able to run your business properly. To buy a van outright can be expensive so you are probably wondering what sort of financing options are available to you. In many cases there isn’t a great deal of difference between buying a van for business purposes or buying a van for individual purposes, so therefore you can except that rather than applying for a personal loan, you would instead apply for a small business loan in order to finance your purchase.
A small business loan
If you are in a position where you have a good credit history and you can demonstrate that your business is being successful, this is probably the easiest way for you to get the money that you need in order to purchase a van. A small business loan is usually between £1000 and £25,000 and will be enough for you to purchase one van. You can expect to pay around 6% interest on these loans, however other fees are minimal and you can generally choose your repayment term from 1 year to ten years. Many small business loans also offer you a 6 month repayment holiday at the beginning of the loan, however you should note that interest continues to be applied to your loan amount that you will have to pay back as part of your future repayments.
Why buying is not always better
If you need more than a single vehicle then chances are you’re going to struggle to afford to buy them outright. While you benefit from flexibility and no restrictions on your vehicle if you buy it outright, you are also likely to end up paying a lot more than if you hire your vehicles in some way. If you lease your vehicles either through a hire purchase plan or through a lease agreement, you will have to deal with some restrictions on the use of your vehicles, in particular the mileage, insurance company and servicing garage, however much of the administration of the vehicle is also taken off your hands if you pick your finance option right.
Perhaps the easiest option, in terms of vehicle management, is to take out a lease agreement. This means you lease the vehicle for a set term and the management of it is taken on by the lease company. There are various different plans you can use, some of which do not require you to buy the vehicle at the end of it, so upgrading becomes very easy, while others do require you to buy the vehicle, which could potentially cost you more than you would like.
Hire purchase plans
Van hire purchase could be an option?
These are by far the most popular with dealers, and they can offer you the finance deal you need in order to be able to afford your van. Many of these deals come with interest free periods at the beginning of the loan, and these can last for up to 5 years. You will have full control of your vehicle, but if you default on your payments you could find that your vehicle becomes at risk of being repossessed. You will also find with this type of loan that you are tied to the dealer for the term of the loan as essentially they retain ownership of the vehicle until you have paid your final instalment. You will also not be able to sell your vehicle on privately until the loan is repaid.
Other types of loan
Get the loan you need with help from a guarantor
If you are in the position of just starting out with your business, have a bad credit rating, or you have no credit rating at all you may have to consider an alternative source of loan for your van. If you want to avoid the incredibly high interest rates of an unsecured loan from a direct lender you do have the option of going for a guarantor loan that derisks your loan to a degree by having someone else who will make the repayments if you are not able. The interest rates are still high, but are more competitive than unsecured bad credit lenders.