Bank of India Car Loan Review

Winner of the IBA Banking Technology Award 2009 for Best Business Enablement Initiative, Bank of India offers a wide range of finance products to customers. Besides purchase of two-wheelers, the Star Autofin scheme from Bank of India allows both individuals and corporate entities to take loans for purchase of

•    new cars

•    pre-owned cars provided they are not more than three years old

•    light vehicles for personal use and not heavy duty driving license viz. Jeeps, Vans and the like

•    Personal vehicles powered by non-conventional energy, such as electronic or battery operated small vehicles for urban transport provided they are registered with RTO.

Click here to Apply for a Car Loan Online

Under certain conditions like curtailed limits of advance and provision of collateral security, Bank of India may also consider extending finance for vehicles using non-conventional energy even though it may not registered with the RTO.

Bank of India offers two main types of car loans – demand loan and term loan. Customers looking to finance second-hand cars have to opt for the former.

Eligibility conditions

Under the Bank of India’s Star Autofin scheme, those eligible for applying for loan to buy a car must be at least one of the following:

•    A salaried employee.

•    A self-employed professional with high net worth.

•    A person engaged in trade or commerce or business.

•    Director of Companies/ Senior Citizen/ Pensioner/Farmer. Staff Members or Retired employees (other than dismissed or compulsorily retired) of Bank of India are also eligible for applying for Star Autofin car loans.

•    Non-resident Indian in case of whom advance will be granted jointly with resident Indians who have to be a close relative.

•    A partnership firm, a company, a proprietary concern or any other type of corporate entity.

For individual car loan applicants, the maximum age limit is 65 years at the time of availing the advance.

Quantum of the loan

Bank of India’s Star Autofin scheme allows individuals to avail of a maximum loan of Rs 25 lacs for Indian-made cars and a maximum of Rs 75 lacs for imported vehicles. The Rs 25 lacs limit for Indian-made cars holds good for both resident and non-resident Indians. Companies and corporate entities are entitled to a maximum loan amount of Rs 100 lacs, for instance to finance a fleet of cars. For four-wheelers running on non-conventional energy and not registered with the RTO, the maximum loan amount is Rs 4 lacs. However the above maximum limits of car loan are subject to following conditions.

•    Pensioners and salaried employees can avail a car loan up to a maximum of twenty-four times the amount of their gross monthly emoluments.

•    The outer limit of loan amount for self-employed individuals is twice of gross average annual income according the latest three years’ Income Tax Returns.

•    For corporate entities, the maximum loan amount will be determined by twice the average annual cash accrual (i.e. PAT + Dep.) as per firms/ companies last 3 years audited balance sheet and/or Profit and Loss accounts.

•    In case of farmers and those engaged in allied activities, the outer limit of loans will be set by the repayment capacity as is applicable in agricultural loans.

In case of salaried employees and professionals, the bank will also ensure that the net take-home pay after deduction of proposed EMI is at least 40% of monthly income.

Margin required

The margin set by Bank of India is 5% of the invoice value of car in case of a new car loan amount up to Rs 2 lacs. For new car loans between Rs 2 lacs and Rs 10 lacs, the margin rises to 10% and in case of loan amount within Rs 10 lacs and Rs 25 lacs, it goes further up to 15% of the car value. Where the loan amount is above Rs 25 lacs, the minimum margin is 25% which is also the same for new car loans availed by companies or corporate entities. Individuals wishing to take loans for pre-owned cars will have to come up with a minimum of 30% of the car value from their own resources.

The Bank of India website does not give any details on the documentation required to accompany the completed application form.

Loan Tenure

Bank of India allows individuals to take a new car loan for a maximum of 6 years in case of Indian-made cars and 7 years for imported cars. Corporate firms can take new car loans for a maximum tenure of 5 years.

Rates of Interest

For the long-term convenience of customers, Bank of India levies interest on a daily reducing balance under its Star Autofin scheme. For new car loan amount less than Rs 10 lacs and loan tenures within three years, the rate of interest is 2.25% below BPLR at a minimum of 9.75% p.a. at monthly rests. For repayment over 3 years and loan amount less than Rs 10 lacs, the rate is 1.75 % below BPLR at a minimum of 10.25% p.a. In case of new car loans over Rs.10 lacs and for loan tenure up to 36 months, the rate of interest is 1.25% below BPLR at a minimum of 10.75% p.a. at monthly rests. Repayment over 3 years for loans over Rs 10 lacs is 0.75% below BPLR at a minimum rate of11.25% p.a.

Loan processing charges levied by Bank of India under its Star Autofin scheme for individuals are:

•    One-time fee of Rs 1000 for loans up to Rs 25000.

•    One-time fee of 1.10% of loan amount for loans between Rs 25000 and Rs 10 lacs, with a minimum of Rs 1,500 and a maximum of Rs 5000.

•    One-time fee of 0.25% of loan amount for loans above Rs 25 lacs with a maximum of Rs 15,000.

In case of corporate firms, the processing fees are double that of above rates. For borrowers in rural areas, the processing charges are 50% of the rates applicable to individuals provided the loans are availed from rural branches.

Loans availed for pre-owned cars under Bank of India’s Star Autofin scheme have certain conditions. The car should not be more than three years old. The loan tenure in case of used cars is also a maximum of three years. The minimum rate of interest for loans less than Rs 10 Lacs is 10.75% p.a at monthly rests and for loans above Rs 10 lacs is 11.75% p.a.

Bank of India requires the presence of a guarantor when the vehicle is not registered with the RTO or when the individual borrower is taking a loan of above Rs 25 lacs. In case of a non-resident Indian applying for a car loan, he/she will have to present a guarantor residing in India.

The Bank of India website providing details of car finance products under Star Autofin scheme does not clarify some points like documentation required, time taken for loan processing and prepayment charges. Prospective borrowers wishing to know more about car finance products are advised to contact nearest branch of Bank of India.