Indian Overseas Bank Car Loan Review

Indian Overseas Bank was found in 1937 with the twin objectives of specializing in foreign exchange business and overseas banking. Today the bank has a wide range of services and products for its domestic customers among which is its vehicle finance plan titled Phushpaka.

The purpose of Indian Overseas Phushpaka plan is to offer finance for the purchase of new as well as used cars.

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Amount of loan

Indian Overseas Bank allows individuals to borrow up to 90% of the cost of a new car and a maximum of 75% of the cost of a pre-owned car under the Phushpaka finance plan.

Eligibility

Individuals who wish to apply for car loans under this scheme from Indian Overseas Bank must be:
*    A permanent employee in a government organization OR
*    A permanent employee of a public sector undertaking OR
*    A permanent employee of a reputed private enterprise OR
*    A self-employed professional.
*    A salaried employee whose take home pay is not less than 50% of the gross monthly salary after Provident Fund and Insurance deductions.
*    A professional whose total monthly income including the income of a spouse and other income is not less than Rs 8000.
Other than the above, the loan can also be applied in the name of a firm or a company.

Margin required

The margin constitutes the difference between the invoice value of the car and the loan amount sanctioned by the financer. According to the provisions of IOB’s Phushpaka scheme, borrowers must meet 10% of the cost of a new vehicle from their own resources.

Documents required

To avail a car loan under IOB’s Phushpaka plan, applicants need to submit the following:

*    The application form duly completed.
*    Proof of income which in the case of salaried employees can be the salary certificate and in respect of self-employed professionals can be Income Tax Returns or assessment order.

*    The quotation or proforma invoice from the dealer in case of a new car.
*    Valuation certificate from two reputed auto dealers in case of pre-owned car.

Maximum loan tenure

Under IOB’s Phushpaka vehicle finance scheme, a borrower can repay the loan for a new car over a maximum period of five years during which he/she must produce 60 Equated Monthly Installments. In case of loan for a used car, the borrower must repay the loan over 36 EMIs, which means that the maximum loan tenure is three years.

Rate of interest

In case of car loans availed under the Phushpaka scheme, a borrower has to pay an 11.50% rate of interest per annum.

Processing fees

For processing of car loans under its Phushpaka vehicle finance plan, the IOB charges a fee of Rs 134 in rural areas and Rs 168 in other areas in case the loan amount is less than Rs 2 lacs.

Where the loan amount is more than Rs 2 lacs, the processing fees charged is Rs. 134/- per Rs. 1 lac or part thereof in rural areas and Rs. 168/- per Rs. 1 lac or part thereof, in other areas. These rates are however subject to change as when decided by the bank.

The Indian Overseas Bank website does not mention if and how much prepayment fees a borrower has to pay in case he/she wishes to foreclose the loan before the stipulated loan period.

Conditions to be met

Those who wish to avail of the car loans under Indian Overseas Bank’s Phushpaka scheme must be prepared to meet the following security conditions:
*    The vehicle purchased with the IOB car loan should be hypothecated to the bank.
*    The Bank’s lien on the vehicle should be marked in the R.C book.
*    The vehicle in question should be insured for the full value with the bank clause.

The security clause on the IOB Phushpaka scheme webpage makes no mention of the requirement of a personal or third party guarantor who has to stand surety for the car loan.

Loans for second hand vehicles

The Phushpaka scheme from Indian Overseas Bank not only offers finance for purchase of new cars but allows borrowers to own a second hand car. However in case one is buying a used car, the vehicle in question should not be more than five years old. This provision of IOB is more customer-friendly since most other lenders require a pre-owned car to be less than three years old in case of availing finance from the bank.

However when borrowing money for purchase of a used car, the applicant needs to have the vehicle certified by at least two reputed auto valuers or auto dealers. The certificate will then have to be produced among the documents necessary for the processing of the loans. While there is no difference in the rate of interest on loans for new and used cars, the loan tenure in case of pre-owned vehicle is lesser at three years as compared to the maximum five years allowed in case of new car loans. Finally when seeking finance for used car, a borrower will have to meet a greater margin of 25% of the car value as compared to the 10% in case of a new car loan.

The Phushpaka vehicle loan plan from Indian Overseas Bank offers a number of advantages to prospective borrowers like relatively lower processing fees and higher loan amount in case of new car loans. However the bank website needs to provide more information on matters like time taken to process loan applications and prepayment charges in case of foreclosure of loans. Finally prospective borrowers can download the application form from the IOB Phushpaka webpage which is an important convenience to customers.