Car financing is basically when you take financial help (loan) from a bank/company to own a car and then pay off that amount as per the terms and conditions. Different banks have different installment patterns and different interest rates, so usually a pattern is observed that the longer you take to pay off the loan, more the interest will be charged. Now this car financing is not only restricted to new cars, but the imported used car financing is also on a rise.

Related read: Finance Or Buy: What’s The Right Choice For Your New Car?

How car financing works

To give you a summary as to how car financing works, here is an overview of all the steps they follow;

1. Eligibility criteria

The procedure for car financing differs from bank to bank but the gist however remains the same.It initially requires you to be up to the eligibility criteria, which usually states that you have to be a Pakistani citizen of around 22-65 years old with a fixed income, be it from a job, or your investments elsewhere or simply your own business. Your income is basically what helps them to decide how much you will pay monthly. Though there are many other details to this, but they differ from bank to bank.

2. Documentation

After this comes the documentations. This is a simple process where you submit all your important documents to the bank for evaluation, like passport size photographs, copies of your national identity card, previous bank statements which prove your credibility in the past, and a letter or document from your office defining your position and salary. This is a list of basic documents that are required by any bank, though there may be an addition depending on your case/ situation.

3. Processing by the bank

Here, it’s solely on the banks working as your part is done now. The bank officials verify and authenticate your details. They weigh out the risk factors for their bank depending on your stability with job/income. After which if everything is clear, they book the car and work towards its delivery and payment procedures. Once all of this is done, your installment is calculated based on your monthly income and the deal is finalized.

Now that you are clear about the working of a car finance process, let’s talk about its benefits and how to utilize them in order to find the best car finance in Pakistan. The first and the most evident advantage is that you get to buy the latest car which otherwise you couldn’t afford. This not only makes you own the best engine there in the market but it also cuts down the maintenance and repair cost which you would’ve had to pay if you bought some old car in that budget of yours. The second advantage is that you don’t have to worry about the market price fluctuations, once the installment amount is decided by the bank, it is fixed no matter how and when the prices of that car change in the market.

Related read: 5 Ways To Get Best Car Finance In Pakistan

Which bank to choose for your car finance?

It’s a long term commitment to a bank when we talk about paying off loans, and it’s not something that you can back off from at any given time. Though there are 6 points, if taken care of, can help you choose the best deals in Pakistan.

1. Interest

Here, some banks offer fixed and others offer a variable rate which varies as per the market value. It is better to opt for a fixed rate as especially in a developing country like Pakistan, you never know when and to what extent the market may rise or fall. Fixed rate gives you a clear vision as to how much you have to pay so that you can plan your other expenditures accordingly.

2. Insurance

Some banks, like Bank Alfalah, offer insurance coverage as well in their installment plans. This is great because not only do you end up getting the car in installments, but you also get car insurance to cover its expenses should something happen to it. This must be taken into account because it can be an important part of your decision.

3. The cost the bank is covering

Now the average amount that any bank cover sis about 85%. Though this might differ. So research well and calculate how much your pocket can bear.

4. Duration

This is the time span that you have in which you have to repay the amount. Again, analyze this having your current income and stability in mind.

5. Early settlement

You can ask the bank about the terms and conditions they have on this, as it may be possible that due to your change in income or savings, you are able to repay the loan earlier than that documented.

6. Other options

Balloon payments are useful if the conditions are favorable. Talk to your bank manager in detail about this before confirming the deal.

These are the basic points that you have to keep in mind while comparing different banks. Remember to have your options open and research well on all banks before finalizing.

To make your research easier, here is a list of best bank for car finance in Pakistan;

1. Dubai Islamic bank – They provide the lowest insurance rates over the tenure of 1-7 years.

1. Faysal bank limited – Known for its fastest hassle free processing

1. Bank Alfalah – Known for its flexibility

1. Askari bank – Finances a wide variety of used and new cars

1. Bank of Punjab – Known for its minimum documentation and great flexibility

Now considering all the pointers above and researching well on these few banks according to your financial situation, you will be easily guided to the best possible car finance in Pakistan that suits your lifestyle.

Khurram Zahid

The post What you must know Before Going for Car Financing in Pakistan appeared first on Smartchoice.pk.

Easy Acceptance:
This is probably the biggest advantage you have when it comes to car financing. Numerous banks in Pakistan are offering car financing with an exceptionally high rate of acceptance when you apply for car financing. The documentation needed is also minimal and the processing times are fast. Thus it totally makes sense to prefer going for car financing rather than buying it outright which might translate into putting yourself into burden financially. Some of the major banks offering car finance in Pakistan are Dubai Islamic Bank, Bank Al Habib, Askari Bank and JS Bank.

Attractive Rates:
Currently most banks are offering car financing services at highly subsidized rates that enable consumers opting for car financing in Pakistan  to make their decisions with ease. Markups can be kept fixed or variable as some banks offer this option. Some banks even offer the option to pay as much as you can in the name of down-payment of the vehicle. You can also avail special rates when it comes to comprehensive insurance of your car. It doesn’t get any easier than this.

Flexibility:
Currently car financing is offered with a ton of options that can be tweaked according to the consumer’s needs. Installments are also based upon the duration of car financing which is usually a long term affair with up to 7 years. Lastly some banks also offer balloon payment options that enable you to pay in lump sum when it’s possible for you thus lowering the number of installments. You can also choose between new, used or imported vehicles of most brands. You can also pay registration and insurance charges in installments which makes it extremely affordable as the down-payment is greatly reduced to lowest possible limits.

Sharia Compliance:
Since we live in a country with its founding roots based upon Islam and the majority of population being Muslim, it’s only natural that most people tend to have their financial transactions done in a Sharia compliant way. Thus many banks have now started to offer Car Ijarah which is based upon Islamic principles and is completely interest free thus a compelling option for those who prefer Islamic banking and finance. Islamic car financing in Pakistan is offered by Meezan Bank, Dubai Islamic Bank and Bank Alfalah being the renowned names.

Do Your Own Research:
Last but not the least this is another important aspect to get the best car finance deal for your new or used car. Always have a look at multiple options and compare them to see if there are any unique offerings from a provider that the others might be lacking on. See markup rates, payment terms and conditions and installment duration etc to see what suits you best and then make your choice.

There you go, following these 5 best practices will ensure that you get the best car finance deal no matter which bank you choose to go with. For any comments or feedback, please write to us at feedback@smartchoice.pk

Khurram Zahid

The post 5 Ways To Get Best Car Finance In Pakistan appeared first on Smartchoice.pk.