Oriental Bank of Commerce Car Loan Review

In the first half of 2009, the Oriental Bank of Commerce registered a 27.19% growth (YOY) in retail advances. A significant part of this achievement owes to the bank’s customer-friendly car finance schemes. The primary purpose of the OBC Vehicle Loan scheme is extending advance for the purchase of two/four wheelers solely for non-commercial use. The four wheelers in this scheme cover cars as well as Multi-Utility vehicles. The vehicle thus bought from OBC Vehicle Loan has to be registered as a Private Vehicle.

Who is eligible for applying for car loans from Oriental Bank of Commerce?

Under the Oriental Bank of Commerce Car Loan scheme, applicants need to have a minimum of Rs 10000 gross monthly salary.

What are the documents necessary while applying for car loans from Oriental Bank of Commerce.

The Oriental Bank of Commerce vehicle loan webpage does not mention the list of the documents required to produce while applying for the loan. However since the bank has stipulated income conditions from applicants, it can be assumed that the lender will require a document establishing proof of income like salary slip/certificate in case of salaried employees and Income Tax Returns or IT Assessment orders in case of self-employed individuals. Other documents that the bank may ask an applicant to produce are proof of identity like a copy of the Passport/ Voters ID Card/ Driver’s Licence etc and proof of address  which can be a copy of the Ration Card/ Electricity Bill/ Landline Telephone Bill/ Passport/ Voter’s ID Card/ Driver’s Licence or any other document approved by the bank.

What is the amount of loan that can be availed under the Oriental Bank of Commerce Car Loan scheme?

The maximum amount of loan that Oriental Bank of Commerce allows under its car finance scheme is Rs 10 lacs. The bank can allow a car loan up to 30 months’ net take home Salary or Income subject to the condition that applicant’s net take home salary after deduction of proposed loan installment should not be less than 40% of the gross salary. In case of existing home loan borrowers, net take home salary should not be less than 30% of gross salary after payment of the proposed loan installment. An applicant can also add in a spouse’s salary or income to avail a larger car loan amount but in this case, the spouse will have to stand in as a personal guarantor.

What is the margin required?

The loan margin is the difference between the invoice value of the car and the amount of loan. Under the Oriental Bank of Commerce car loan scheme, applicants should be prepared to meet 15% of the total vehicle cost from his or her own resources.

How long will it take to process a car loan?

The Oriental Bank of Commerce vehicle loan webpage does not specify the time taken to process a loan.

What is the loan repayment period?

Under the Oriental Bank of Commerce, a borrower can take a maximum of seven years to repay a car loan. This means that the borrower must repay the loan amount with interest within a maximum of 84 Equated Monthly Installments or EMIs. However in case of salaried borrowers, the bank may subject the loan tenure to the remaining period of service or repayment capacity.

What are the rates of interest levied on Oriental Bank of Commerce car loans?

Starting from September 7, 2009, the Oriental Bank of Commerce has fixed the following rates of interest on its car loans:

1    For loans with repayment period less than three years, the rate of interest is 10.25% which is 1.75% lower than the Prime Lending Rate or PLR.

2    For loans with repayment period above three years, the rate of interest is 10.75% which is 1.25% lower than the PLR.

Currently the PLR or Prime Lending Rate followed by Oriental Bank of Commerce is 12.00%.

What are the processing and prepayment charges applicable to Oriental Bank of Commerce Car Loans?

The Oriental Bank of Commerce charges a processing fee of 0.50% of the loan amount.  The minimum processing fee for all car loans is Rs 500. The website does not mention if and how much prepayment charges the bank will levy in case the borrower wishes to foreclose the car loan.

What about loans for second hand cars?

The Oriental Bank of Commerce also grants finance for pre-owned cars but does not specify how old they should be in order to qualify for the loan. In case of used cars, borrowers can avail a maximum of Rs 7.5 lacs from OBC. However the applicant will need to bear a relatively higher margin of 20% under the True Value Scheme (TVS) and 30% for Non-TVS vehicles. Furthermore, the used car loan from OBC carries a higher rate of interest as compared to new car loans. The rate of interest list for retail advances from Oriental Bank of Commerce states that in case of second hand car loans with tenure below three years, the rate will be 13.25% or 1.25% above the PLR and for loans with tenure of more than three years, it will be 13.75% or 1.50% above the PLR. However there is no word on the maximum number of years within which borrowers of used car loans have to repay the amount with interest.

What are the security conditions imposed by the Bank?

According to Oriental Bank of Commerce regulations, the vehicle purchased from its loan must be hypothecated to the bank and a personal guarantor provided to stand surety for the loan. In case the applicant has clubbed his/her spouse’s income or salary to avail a higher loan amount, then the spouse must stand as a personal guarantor.

Does the OBC have any other type of car loan scheme?

The Oriental Bank of Commerce also extends car finance for commercial purposes. Under this plan, an applicant can avail a maximum loan of Rs 5 lacs with a margin of 25%. The repayment period of this loan scheme is 48 months which can be extended to 60 months under special circumstances. However the car loans for commercial purposes carry stricter security conditions than those meant for personal use.

The Oriental Bank of Commerce has variety of finance plans according to varying resources and purposes and most of the schemes carry a relatively lower processing fee. However the bank website should be clearer on the documentation required for loan processing and have an online application form for convenience of prospective applicants.