Commercial Purchase Loan
Any business needs a stable operating place at some point in its running time. Be it a small shop, an office, a whole business floor or a huge business complex, businessmen and entrepreneurs need a piece of property to run their respective businesses. But purchasing a commercial property requires huge investment. This investment cannot be afforded with a mere business loan as it the components like interest rate, tenure and amount does not add up. So many banks and NBFCs provide a special Commercial Purchase Loan to buy a property for commercial and business use only. Businessmen can purchase shops, galas, showrooms, commercial buildings, restaurant property etc. under this loan. Borrowers can get the loan for under construction as well as ready to move in property. This is a secured type of loan so the property is kept as a mortgage to the lender until the borrower pays off the loan in full in given deadline. The amount to purchase the property is decided on the basis of demographics, applicant’s credit history and ability to repay the given loan. These criteria also decide the interest rate and tenure. The borrower/s are supposed to pay off the principal amount of loan with the interest in the given tenure.
Why should you take a Commercial Purchase Loan?
Nationwide increase in property rate: The increase in the property rate across the nation has made it impossible for businessmen to purchase a commercial property by only using their existing personal savings or business’s working capital. There are many hidden charges and processing fees in the process of purchasing a commercial property. So instead of buying a house by spending every last penny of your savings and living in constant pressure of being financially unsecured, you should definitely take a commercial purchase loan.
Large scale financial transactions: Buying a property involves large scale financial transactions. At the time of buying a property, a buyer does not necessarily have the entire amount to his/her disposal. Here commercial purchase loan covers the financial gap and helps you for a smooth financial transaction.
You don’t have to spend all of your savings: When banks give away home loans, they finance you up to 70%-80% of the original property purchase price. The borrowers are supposed to pay only 20%-30% of remaining amount. This helps to loosen the financial burden on your shoulders. This way you don’t have to spend all your savings purchasing a commercial property.
What are the Characteristics of Commercial Purchase Loan?
- Commercial purchase loans come with longer repayment period, as long as 15 years. It includes repaying the principal amount along with the interest costs.
- The EMI (Equated Monthly Installment) of the loan is formed by combining the principal amount and the interest together.
- The commercial purchase loan charges are inclusive of registration charge, processing fees, prepayment penalty, commitment charge and miscellaneous charges for documentation and consultation.
- Commercial purchase loans are considered as secured advances.
- To avail a commercial purchase loan, borrower has to give mortgage. The collateral here is the property that is being bought.
- The banks offer commercial purchase loan with three main types of interest rates: Fixed, Floating or a combination of fixed and floating (semi flexi). The interest rate automatically changes in 3 years from fixed to floating.
- To reduce liability, banks accept pre-payments. It is allowed by all banks and NBFCs.
- You can get a commercial purchase loan irrespective of whether you want a start your business there; renting it or purchasing it just for investment purposes.
- In commercial purchase loans, you can get loans in higher amounts compared to other types of loans i.e. 70% to 80%.
- To avail the commercial purchase loans you can have your spouse or parents as co-applicant or joint applicant.
- The interest rate on commercial purchase loan is comparatively lower than personal loan as it is a type a secured loan. It starts from 9.50%.*
- The amount bank will give you under commercial purchase loan will vary based on your income, credit history, the locality/city you are planning the purchase the property in and various other factors.
What are the Eligibility Criteria to avail a Commercial Purchase Loan?
To determine whether you are eligible to get a commercial purchase loan or not, there are various criteria involved. Such as income, employment status, loan tenure etc.
- The criteria differ from bank to bank. But we have given some of the important eligibility criteria below:
- Any consumer who has a regular and steady source of income can get a commercial purchase loan.
- Irrespective of consumer’s profession (salaried, self-employed or business person) he/she can get a commercial purchase loan
- The consumer, who wants to apply for commercial purchase loan, should be of minimum 25 years old. Whereas the repayments has to be done by the age of 65.
- Applicant’s savings history with bank plays an important role in approval of the loan.
- If you have a bad credit history, especially before 3 months of applying for commercial purchase loan, it can become a large hurdle in accessing the loan.
- Those who have their own business or are self employed, have to present their profits and turn over to determine the value of loan they’ll be applying.
- The applicant also has to give the proof of current residence. He or she should be staying at the current residence for at least a year. As it will be seen as a proof of stability with along with employment and financial.
- You should also have a good credit score of minimum 700.
What are the Documents Required to avail a Commercial Purchase Loan?
The process of getting a commercial purchase loan can be made easier if you know exactly what documents you need to submit with your application. The documents are filed according to the eligibility criteria. The list of required documents differs from bank to bank. But we have given a generic list of required documents below:
- The list of required documents differs from bank to bank. But we have given a generic list of required documents below:
- Neatly signed and filled commercial purchase loan application form.
- Passport-size photographs.
- Statements of investments (if any).
- Copy of plan approved for the proposed construction.
- Cost estimation or valuation report from the bank’s (or finance company’s) panel CA.
- Allotment letter of housing board/NOC of the society/builder etc.
- Bank statements and salary slips of last 6 months from application date.
- Identity and signature proof – Passport, Pan card, Driving License, Voter ID card, Aadhar card, employee identity card in case of government employees.
- Address Proof – Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/electricity/water/credit card bill or Property tax.
- Age Proof – Voter ID card, Secondary school leaving certificate (class 10), birth certificate, Passport, Aadhar Card, pension payment order or receipt of LIC policy.
- Valuation/cost estimation report from evaluator approved by the NBFC or Bank.
- Property papers with OC and CC.
- Chain of agreement if the property is in resale.
Additional Documents to be submitted by salaried applicants:
Salary certificate from the employer (original).
Copy of ITR or Form 16 for last 2 years
Additional Documents to be submitted by Non-Salaried/Self-Employed/Professionals/Other
Copy of challans proving that Advance Income Tax has been paid.
Copy of ITR/Assessment Orders of 3 years.
Business proof (registration of business).
Bank statements of last one year.
What are the Fees and Charges Applicable to Commercial Purchase Loan?
There are specific fees and charges applied by banks and NBFCs while processing the commercial purchase loans. These charges are different from the interest rates. These charges differ in value from bank to bank, but the types of charges are the same everywhere.
Banks charge a non-refundable processing fee for your commercial purchase loan request. Different banks charges different amounts as processing fee. This fee is either a specific percentage of the loan amount or a fixed amount of money. Depending upon applicant's profile and considering some terms and conditions, banks often negotiate and lower the processing charges or waive it off completely.
Banks offer commercial purchase loans on two types of interest rates: fixed interest rate or floating interest rate. The borrower can between these two interest rates. Every time a borrower applies for switching from fixed rate to floating or vice versa, conversion charges are applied by the bank. These charges are some specific percentage of the principal amount of the loan.
Some banks charge administrative fee separately from the processing fee. Administrative fee is applied by banks to compensate for the back-end administrative processes that are performed while processing of commercial purchase loan applications.
Late payment charges
If the borrower is late in paying any of the loan installments, almost all the banks impose late payment charges on the borrower. Be it any reason, financial crunch or some other financial liability or plain oversight, banks do not bend their rules.
Banks need lawyers to complete the task of verification of property, for which loan will be given. As many banks do not have in-house lawyers, they hire them to complete the task and recover their fees from commercial purchase loan applicants.
Why Choose Richi Loans & Financial Services To Apply For Home Loan?
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How to Apply For A Commercial Purchase Loan on Richi Loans & Financial Services?
- Applying for a commercial purchase loan on Richi Loans & Financial Services involves few easy steps:
- Step 1: Go to the ” Commercial Purchase Loan ‘ page on our website and click on ‘Apply Now’box.
- Step 2: Fill out the initial personal and financial information. Once completed, our loan calculator checks your eligibility with its highly efficient algorithm.
- Step 3: Our loan calculator presents you a list of banks and NBFCs most suitable for you as per your eligibility criteria. The list will include the name of the financial institutions, interest rates, required document list etc.
- Step 4:From the given list, you can choose the financial institute of your choice. You can start filling up the form and upload the required documents. Here, if needed, you can call or mail our experts for advice. The contact details are given on our website.
- Step 5: Your application will be sent electronically to the bank you selected. You will be informed about the status of your application via SMS, email or you can track it via website too.
Frequently Ask Questions
Repayment period of loan starts after the entire commercial purchase loan is disbursed to the borrower. If the property is under-construction, then the banks allow payment of the partially disbursed amount. Towards this partially disbursed loan amount, borrowers are allowed to either repay the principal and interest amount both or just the interest amount or none of the above mentioned amounts at all.
The commercial purchase loan is sanctioned as soon as all the required documents are submitted and verified successfully. This procedure takes anywhere between 10 to 30 days.