Karnataka Bank Ltd Car Loan Review

Karnataka Bank Ltd claims to offer a comprehensive range of customized products and services suitable for every kind of personal need – business or personal. As part of this initiative, Karnataka Bank Ltd has come up with several kinds of advance schemes, one of which is the Vehicle loan plan.

Under its car loan scheme, Karnataka Bank Ltd extends finance for the purchase of both new and used cars for personal use.

Click here to Apply for a Car Loan Online

Eligibility conditions

The KBL car finance scheme allows the following parties to be eligible for availing loans:
•    An individual who is an income tax assessee.
•    An individual who is minimum 21 years of age.
•    A salaried individual who is a permanent employee of a reputed organization or company.
•    A businessman who has been in business for a minimum period of 1 year.
•    A company / firm/ trust/ association/society can apply for a car loan in its name or in the name of its executive/ managing director/ managing partner/ managing partner/ managing trustee/ president/ secretary.
•    A non-resident Indian.

The website of Karnataka Bank Ltd does not mention the minimum annual salary or minimum annual income that an individual should have in case he/she wishes to avail a car loan from the bank.

Quantum of loan

Under the KBL car finance plan, a borrower can avail up to 85% of the invoice value of a new car excluding road tax and insurance of the vehicle. The maximum amount of loan that can be approved for purchase of new car from Karnataka Bank is Rs 30 lacs. In case of purchase of used car, the ceiling on loan amount is Rs 15 lacs.

Margin required

When availing a new car loan from Karnataka Bank, the applicant will have to pay 15% of the cost of the vehicle from own resources.

The Karnataka Bank website does not specify how long it will take for a car loan to be processed after completion of all documentation.

Necessary documents

A person wishing to avail a car loan under Karnataka Bank’s vehicle finance scheme must produce the documents related to proof of income along with the completed application form. In case of salaried employees, the proof of income can be a salary certificate. For self-employed professionals, income tax returns or assessment order can constitute proof of income. For business concerns, trusts or societies, income can be proved by audited financial statements.

Loan tenure

The period of repayment for car loans from Karnataka Bank ranges from 60 months in case of new cars to 34 months for used cars.

Rate of interest

The car finance scheme from Karnataka Bank levies a 10.50% rate of interest on loans for new cars in case where the repayment tenure is three years or less. If the loan tenure exceeds three years then the rate of interest on new car loans will rise to 11% per annum. For used car loans, the rate of interest is 13.75%.

Processing charges

The list of credit service charges on Karnataka Bank’s website states that for loans from Rs 25000 to Rs 1 lac, the processing fee will be 0.50% of the loan amount with a minimum of Rs 250. In case the loan amount is above Rs 1 lac, the processing fee will still be 0.50% of the loan amount but with a maximum limit of Rs 12,50,000.

Prepayment charges

According to the list of credit services on the website of Karnataka Bank, foreclosure of loans will attract a fee of 1% of the outstanding balance.

Loan security conditions

Those availing a car loan under Karnataka Bank’s vehicle finance scheme are expected to hypothecate the vehicle purchased in the name of the bank. Other than this, the bank may require third party co-obligation/ guarantee in case of loan availed by an individual.

Loan for used car

The car finance scheme from Karnataka Bank is not only meant for the purchase of new cars but also allows loan for pre-owned cars. However in case of loans for used car, the vehicle should not be more than three years old from the date of the registration. Furthermore the bank may require the borrower to have the vehicle valued by an automobile engineer or approved auto dealer. At the time of documentation, the bank may ask for the valuation certificate of the vehicle from the loan applicant.

In case of loan for pre-owned car, the applicant can avail a maximum loan of Rs 15 lacs which is only half of what can be availed at the most under new car loan. All loans for the purchase of used cars carry a relatively higher 13.75% rate of interest. Finally in case of second-hand vehicle, the loan will have to be repaid over a maximum period of 34 Equated Monthly Installments or EMIs.

Car loan for commercial purpose

Other than offering car loans for personal use, Karnataka Bank also extends finance in case an applicant wishes to purchase a car for commercial use. This scheme is titled KBL Vahana Mitra and is open to an individual, Hindu Undivided Family, Partnership Firm or any registered Company, schools, colleges, hospitals, nursing firms and hostels run by trust or associations. The maximum amount of loan allowed under this scheme is 85% of the invoice value for a new vehicle, excluding Road Tax and Insurance, Permit etc. The repayment period of car loan under this scheme is a maximum period of 60 months. For loans up to Rs 10 lacs in this scheme, the borrower must provide co-obligation or guarantee by a solvent party besides the vehicle being hypothecated to the bank. In case the loan amount is above Rs 10 lacs, then the borrower must provide equitable mortgage of property of value not lower than 50% of the loan amount OR solvent co-obligation acceptable to the bank OR liquid securities like NSC's, KVPS, LIC Policies having SV and Deposits of value of at least 35% of the loan amount or more.

According to the information of its website, the Karnataka Bank Ltd has a wide range of car loan products tailored for varying purposes and resources. The site also provides an opportunity to download the car loan application form and another link to calculate the expected EMI. However the bank website needs to be clearer on the eligibility conditions especially with regard to income as well as on the documentation necessary for swift processing of its car loans.