Punjab National Bank Car Loan Review

The first bank of the country to start with Indian capital, Punjab National Bank has come a long way since it modest beginnings. Today it is the bank with the largest branch network in India - 4525 offices including 432 extension counters spread throughout the country. Among the many banking products that Punjab National Bank offers, are a range of car finance options which can be availed for the purchase of cars, jeeps, vans, multi-utility as well as sports utility vehicles.

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Car loan eligibility

Punjab National Bank has car finance products for both individuals as well as business concerns which may be corporate or non-corporate. However the vehicle bought on loan from PNB must be meant for private use and not for commercial purposes.

The website of Punjab National Bank car finance does not specify what documents need to be produced while applying for a car loan. For this the applicant will need to contact the nearest branch or get in touch with a representative of the bank.

Amount of loan

Individual borrowers and proprietary concerns can take loans to the tune of Rs 25 lacs or up to 25 times of their monthly net salary, whichever is lower. In case of individual applicants, the income of parent(s) or spouse can also be considered while determining the loan amount. However in such cases, the parent(s) or spouse will have to stand as additional guarantor for the loan.

In case of business concerns, Punjab National Bank does not impose an upper limit on the quantum of loan car loan taken for one or more vehicles.

Margin required

The margin is the difference between the car value and the amount of loan approved and is to be paid by the borrower from his/her own resources. In case of loans for new cars, the margin specified by Punjab National Bank is 20% of the value of car while for used car loans it is 30%.

The car finance page on Punjab National Bank website gives no indication of the time required to process applications for car loans.

Tenure of car loans

In case of loans for new cars, the loan amount as well as the interest is to be repaid within a maximum period of seven years in 84 equated monthly installments. On the other hand, used car loans will have to be repaid together with interest within a maximum period of five years in 60 equated monthly installments.

What are the rates of interest levied on car loans by Punjab National Bank?

The rate of interest on Punjab National Bank car loans for individuals with RBL score of 60 and above is 10.50%. In case of business concerns and other individuals, the rate of interest goes up marginally to 11.00%. RBL stands for risk based lending and is used by financers to identify the relative risk of loan repayment by different borrowers.

The Punjab National Bank website specifies that these rates are applicable on a fixed option basis and can be reset after one year. If the rate of interest is not revised by the bank in any year, then the rate of interest of the previous year will continue to apply for the year. However if there is any delay in the revision of interest, then appropriate adjustments will be made in the loan account of the borrower.

Service charges levied

In case of all car loans, Bank of Punjab levies a documentation fee of 1% of the loan amount with a maximum limit of Rs 6000. This rate is however does not include service tax and education cess.

Prepayment penalties

In case of early closure of loans, banks and financing companies often levy a prepayment penalty on the borrower. The website of Bank of Punjab gives no information on whether such a charge will be imposed on the borrower in case of foreclosure of car loan taken from the bank.

Personal guarantor

Bank of Punjab has relatively strict clauses on presence of personal guarantor required for approval of car loans. A borrower has to provide any one of the following:

•    Guarantee of spouse if earning/employed.
•    A third party guarantor.
•    Collateral Security in the shape of either Immovable Property or Liquid Security equivalent to 100% of loan amount.

In case the loan applicant has taken into consideration the income of a spouse or parent(s) for determining the loan amount, then additional guarantee of the spouse or parent(s) has to be shown.

Finally, Punjab National Bank requires the vehicle bought by its car loan to be hypothecated to the bank. It should be registered in the name of the borrower jointly with the bank.

Finance for used vehicles

Bank of Punjab has finance options for purchase of pre-owned vehicles too. To qualify for the loan, the car in question must not be more than three years old. There are a few other special conditions regarding loan for used cars. For instance the repayment schedule is tighter compared to new car loans. Loans for pre-owned cars have to be repaid with interest within five years in 60 equated monthly installments. Beside this the margin required is 30%, an extra ten percent than what is required for new car loans. There is however no difference in the rate of interest for new and used cars loans.

The Bank of Punjab car loans webpage does not give information on a lot of points which are of importance to a prospective borrower – the documents necessary to accompany a loan application, prepayment fees in case of foreclosure of loans or the time taken to process a loan. However the page has a link to online application form which includes necessary details like age and identity proof of the applicant. The online form when completed and submitted is sure to elicit a response from the bank.