Al Habib Bank Car Loan
Car financing options being offered by Banks
Car financing falls into the category of consumer financing and forms the largest chunk. The demand for car financing has constantly grown in the last two decades, although it might slow down now because of increased inflation and slightly stricter conditions laid by the State Bank of Pakistan. Nevertheless, car financing remains one of the fastest-growing banking sectors. There are three types of financial institutions which are offering car financing facilities to consumers in Pakistan. These include lease companies, conventional banks, and Islamic banks. Leasing companies are few and have a much smaller presence in the consumer market when it comes to individuals. Conventional banks are the largest player followed by Islamic banks ( and Islamic window operations of conventional banks). You can avail of conventional facilities such as Al Habib Bank Car Loan or go for Islamic loans.
Bank Alfalah Islamic Car Finance– Mode of Islamic financing
Bank Alfalah is offering an Islamic mode of car financing through its Islamic window operations. Historically, Islamic banks or Islamic window operations in Pakistan offered vehicle financing on Ijarah mode but lately, they have shifted to diminishing musharika mode as well. Ijarah mode is closer to a conventional lease facility with the exception that profit is charged in the form of the rental instead of mark-up. The entire ownership remains with the bank till the end of the financing tenor in Ijarah mode. At the end of the financing tenor, the borrower is offered to purchase the vehicle at the residual value. Most Islamic banks have turned to Diminishing Musharika mode, while some are still offering both. The DM mode works on the principle of joint ownership. Simply put, the bank and the borrower make a joint investment in the vehicle. For instance 70: 30, with 70 % being the participation of the Islamic bank and 30 % being the customer’s contribution or investment. The financed amount or the ownership of the bank is divided into Musharika Units which are spread over the entire tenor of the loan on monthly basis. The monthly instalment, therefore, includes two things. The price of a musharika unit and the amount of rental for the ownership share of the bank. With every monthly rental you pay, you purchase a musharika unit, your ownership keeps increasing with every purchase while that of the bank keeps reducing. At the end of the loan tenor, you have purchased all musharika units while the ownership of the bank becomes zero.
Salient features of Bank Alfalah Islamic Car Finance
Who is eligible?
- Any Pakistani resident who is at least 21 years old and has a valid national ID card can avail of the Islamic car financing facility being offered by Bank Alfalah.
- You have to be a Salaried person with a minimum income of Rs.25,000/month or a self-employed/businessman with an income of Rs.50,000/month at least.
- The eligible age range for salaried individuals working in a public/government organization is 21-60 years, while for those doing private jobs the range is 21-65 years.
- The eligible age range for businessmen/self-employed personnel is 21-70 years.
- The maximum age limit for both the above classes is calculated at par with the maturity of the loan.
- Salaried individuals who are permanent employees should have spent at least six months in their current organization while contractual employees should have spent at least one year in their current organization
What are the features of the Bank Alfalah Islamic car finance facility?
- The tenor for which you can avail car loan ranges from 1 year to 7 years. This is valid only for vehicles with an engine capacity of 1000 CC or less.
- The allowable tenor for vehicles with an engine capacity larger than 1000 CC ranges from 1 year to 5 years.
- The minimum musharika share/security deposit for 1000 CC vehicles or less is 15 % while for vehicles larger than 1000 CC it is 30 %.
- You can procure brand-new Locally manufactured/assembled vehicles and used vehicles. However, the tenor and security deposit of used vehicles may vary according to the condition and the value of the car.
Other important facts about Bank Alfalah Islamic Car finance
- Being an Islamic facility, the bank will not charge you any rentals before you receive your vehicle.
- There are no upfront registration or takaful charges.
- The bank will pay the withholding tax.
- Bank Alfalah offers you a residual value option that can make your rentals lower.
The documents you require for filing your loan application
- Completely and correctly filled out Bank Alfalah’s application form.
- Copy of valid Identity card NICOP/CNIC/Others
- Two photographs
- Salary slip copy
- Bank statement ( At least six months)
- In case there is no bank statement, then a Verification report by a PBA ( Pakistan Bankers Association ) approved valuator for income will be required.
- Busi
