Kotak Mahindra Bank Car Loan Review

Kotak Mahindra Bank Limited offers finance options for cars through its subsidiary Kotak Mahindra Prime Limited (KMPL). The Kotak Mahindra Bank website claims KMPL to be India’s leading car finance company which provides loans for a wide range of passenger cars, multi-utility vehicles and also pre-owned cars. Other than these KMPL also finances some imported cars subject to fulfillment of certain terms and conditions.

Amount of Loan from Kotak Mahindra Bank

According to the new car finance deals offered by Kotak Mahindra Bank, a borrower can avail of a minimum loan of Rs 75,000 and up to a maximum of 90% of the invoice value of the car. In most cases, the borrower has to pay the margin money, or the difference between the invoice value and finance amount, directly to the car dealer. In some cases, the borrower can also pay the margin money to KMPL whereupon the company will release the entire invoice value to the dealer.

Eligibility

Salaried employees who:
•    Are at least 21 years of age and who will be less than 58 at the end of loan tenure
•    Are drawing a minimum of Rs 100000 net annual income
•    Have been employed for at least six months.

For self-employed individuals, the conditions of eligibility are:
•    Minimum age of 21 years and maximum of 65 on maturity of loan
•    Employed in a business for at least two years

Other than individual persons, Public and Private Limited Companies, Partnership firms as well as Hindu Undivided Families (HUFs) and Trusts are also eligible for applying for new car loans from KMPL.

Documents required to apply for new car loans

Salaried employees need to possess:
•    Proof of Identity which can be a copy of the Passport, PAN Card, Voters Identity card or driving licence, in case of which the document must be recent, legible and laminated.
•    Latest salary slip with Form 16 for proof of income
•    Proof of residence which can be a copy of the Ration card/Driving licence/Voters card/passport copy/telephone bill/ electricity bill/Life insurance policy or PAN Card
•    Bank statement of the salary account
•    One photograph signed by applicant

For self-employed professionals, the required documents are:
•    Proof of Identity which can include a copy of the Passport, PAN Card, Voters Id car or driving licence which however must be Laminated, Recent and Legible.
•    The latest Income Tax Return for proof of annual income
•    Address proof which can include a copy of the Ration card/Driving licence/Voters card/passport copy/telephone bill/ electricity bill/Life insurance policy or PAN Card
•    Business bank statement
•    One photograph signed by applicant

Time taken for loan approval

The Kotak Mahindra car finance website claims that loans are processed within 48 hours of receiving all complete documentation. However the final approval of the loan is up to the discretion of the company authorities. Among other steps of the loan processing are verification of signature from the applicant’s Banker / Voters ID / IT PAN card / IT Return / Driving License/ Passport, computation of last two years’ income as well as profit and loss account certified by CA in case of non-salaried applicant, partnership deed/Trust deed and letter of authority for partnership firms and trusts and finally MOA and Board Resolution authorizing one director to execute the agreement in case of partnership firms and companies

Repayment conditions

A person availing car finance from KMPL has the option of repaying the loan over a period of 12 to 60 months. Kotak Mahindra car finance offers a number of repayment schemes to suit the convenience of borrowers with varying financial resources.

•    One is the Step-up scheme in which case the borrower can increase in EMI after every year, six months or quarter. This enables the borrower to make payments in line with his/her growing income and is especially suited for people who want the luxury car experience.
•    A borrower can also take advantage of the Balloon scheme which enables him/her to pay reduced EMI for the entire tenure while paying 10%-25% of the cost of the car as last EMI. This plan is ideal for those customers who want to dispose off their vehicle at the end of the tenure and are looking at affordable EMIs during the tenure.
•    Yet another scheme is the Advance EMI Scheme where the borrower Make the payments of a few monthly installments upfront and this enables him/her to repay the loan at a much faster rate.

Rates and charges

The Kotak Mahindra car finance website does not explicitly state the rates of interest they are offering on their loans. However if a borrowers wishes to prepay the loan, then he/she would have to pay a fee which is 5.75 % of the outstanding principal. Other than this Rs 250 will have to be paid for preparation of foreclosure report. Among other significant charges imposed by the bank are 3% on outstanding EMI for overdue interest, 3% of overdue amount compounded monthly in case of late payment of EMI and minimum 3% of EMI for collection charges.

Generally KMPL does not require the presence of a guarantor for approval of loan. However in cases where the income or age of the applicant does not meet the bank’s credit criteria, then the applicant may be required to present a guarantor to stand surety for the loan.

Finance for pre-owned cars

Kotak Mahindra Prime Limited also offers financing for used cars In which case a borrower may avail up to 90% of the value of the car. In this segment one can choose between a pre-approved loan where the maximum amount one can borrow is Rs 1.5 lacs and which according to KMPL requires “minimum documentation” or a Preferred segment loan where the amount may vary between Rs. 1.5 – Rs. 15 Lacs and up to 85% of the car’s value may be funded with maximum tenure of 60 months. Salaried individuals also have the option of an easily-approved loan where monthly Installments may be up to 40% of net salary and the loan amount equal to 2 times of the annual salary.

Kotak Mahindra Prime Limited has preferred financier relationship with various car manufacturers in India such as General Motors, Honda, Hyundai, Maruti, Toyota, M&M, Volkswagen, Skoda, Audi and the like. KMP also has a robust delivery platform. As on May 31, 2009 the company claims to have a retail distribution network comprising 54 branches (including representative offices) covering about 100 locations in 16 states in the country and a wide distribution network of Direct Marketing Associates, brokers and agencies which the company believes is essential to sustained growth.