Frequently Asked Questions

Every bank has their own respective policy. However you will find that the minimum will generally range from as little as PKR 100,000 to a maximum of PKR 5,000,000 and upwards (in special instances). The amount of loan or financing that you actually qualify for will depend on your monthly income, occupation, among other things, existing debt. Every auto financing provider has their respective criteria's.

Generally speaking, auto loans range from as little a period as 1 year up to in some cases 7 years.

Most bank's have their respective policies for the minimum and maximum age. However, most banks consider you for an auto loan if you are above 21 and below 65.

Debt burden is a ratio which bank's look at to evaluate how much debt you currently owe to other institutions. The debt burden tells loan providers how much you are paying towards paying off existing loans or credit obligations with other financial institutions. Generally bank's are hesitant to offer loans to individuals who already have many loans or credit facilities to their name. Since these people are already paying high portions of their income towards paying off existing loans that they have taken on.

Generally, mostly all banks offer financing facility against brand new locally assembled vehicles, brand new imported vehicles, or alternatively used imported/locally assembled cars. However, most banks have policies for how old a used car can be in the case of used vehicles - such policies vary from provider to provider.

Yes, in most cases you have to contribute a minimum of 10% of the value of the car, this is usually referred to as the down payment. Additionally in most instances the processing fee, first year insurance/takaful payment is also taken up front at the time of processing the loan. However, there may be some auto loan products available which factor in the processing fee and upfront insurance/takaful, et al upfront. You should be aware of such features, as they can mislead you to believe that you are paying less. Having said this both types of upfront payment mechanism's have their respective pros and cons.

The most common way an auto loan is priced in Pakistan is on a floating mechanism. This means that the bank charges a spread of a reference rate known as the Karachi Inter Bank Offered Rate (KIBOR). For example if the bank has a spread of 4%, and the prevailing KIBOR is 6.35%, the rate charged to the customer will be 10.35%. Ie 6.35% plus the 4% spread. When loans are priced on a floating basis the actual rate applicable on the customer may be subject to changes every year, due to changes in the KIBOR. However the changes in rate may go up or down based on how the prevailing interest rate climate in the financial market.

The other way in which an auto loan can be priced, is on a fixed rate basis. This means the bank determines a fixed rate to charge the customer. This rate remains fixed during the entire life of the loan.

A car ijarah is the Islamic alternative to leasing. According to car ijarah's the ijarah provider rents the customer the vehicle. To use the vehicle the customer is responsible for making monthly rentals. The ownership of the vehicle resides with the car ijarah provider.

EMI stands for equal monthly installments. This is the monthly payment you have to make to repay your auto loan off.

In the event that the rate and payment amount changes, the provider will send you a notice with your new payment schedule before the new payment amount becomes effective. Since such incidents occur every annum, the loan provider informs you well in advance.

When your loan is disbursed you are assigned an account where you have to deposit your payment. This account is usually linked to the loan account where the loan was disbursed.

Yes, you can prepay your loan. The loan provider will have some sort of prepayment condition that you will have to fulfill when you are exercising your right to prepay. You can either make partial prepayments, or complete prepayments.

Yes, the bank or loan provider will arrange for the insurance at the time you are taking out the loan. In most cases at the time of paying your down payment most institutions will take the 1st year insurance upfront and the subsequent years premium will be built in to the monthly installments.

Generally car Ijarah products factor in all takaful coverage for the entire term of the arrangement in the monthly payments//rentals. Generally you don't have to worry about the first year advance as you would have had to pay in the case of a conventional auto loan.

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