As a premier financial institution in India, Karnataka Bank has emerged as a leading commercial bank providing a bouquet of services to customers. Established in 1924 in the coastal town of Mangalore, Karnataka Bank has over 9 decades of banking experience. Karnataka Bank caters to a wide variety of customer profiles, with a national network of 690 branches spread across various states in India. Aiming to provide high quality banking services, Karnataka Bank has a dedicated team of professionals and over 9.2 million customers, countrywide. With state-of-the-art technology, Karnataka Bank offers an extensive array of products ranging from loans, deposits, insurance, demat and other retail banking services.
The KBL Car Finance plan can be opted by customers as an affordable auto financing scheme for the purchase of new cars. Karnataka Bank finances up to 85% of the new vehicle and customers can opt for loan tenures up to 60 months. The bank requires borrowers to furnish security for the new vehicle, as third party guarantee and hypothecation of the vehicle. Karnataka Bank car loans can be got at low interest rates, depending on the loan amount availed by the customer. Customers can conveniently check their car loan status and get monthly statements using the robust internet banking platform provided by Karnataka Bank. Enquiries regarding their car loan accounts can also be done using mobile banking services offered by Karnataka Bank to customers. Borrowers will get instant SMS alerts on their mobile phones when they use this service. Additionally, individuals can view all the details regarding their car loan accounts on the Karnataka Bank web portal.
Individuals who are income tax assesses, companies, corporate firms, societies, associations and Non-resident Indians are eligible to procure a Karnataka Bank car loan. Customers can take car loans at fixed interest rates, depending on the prevailing base rate of the bank. For a car loan amount of up to Rs 75 lakhs, Karnataka Bank offers an affordable fixed interest rate of 10.50%. Borrowers can get excellent deals on car loans, based on their down payment amounts and amount financed.
|New Car Interest Rates|
|Loan Amount up to Rs 75 lakhs||10.25 + 0.25% = 10.50%|
|Loan Processing Charges||0.25% of the loan amount / Minimum of Rs 250 Additionally, an asset verification or inspection charge of Rs 1000.00 will also be levied.|
|Loan Tenure||Maximum Tenure - 60 Months|
|Quantum of Loan||Up to 85% of the invoice value. The road tax and insurance is excluded here.|
|Foreclosure Charges||1% of the outstanding principal balance.|
|Issuance of NOC||Rs.100/- per certificate|
|Security/ Third Party Guarantee / Hypothecation||Required for new cars.|
Opting to repay a Karnataka Bank car loans using an EMI is one of the most convenient options available to borrowers. An EMI or an equated monthly installment is the sum of the amount that has to be paid back by the customer, after availing the car loan. This repayment has to be done within a particular time period and is inclusive of the interest rate charged by the bank plus the principal amount. When the loan tenure starts, customers have a specific amount every month and initially borrowers would be paying EMIs which contain more interest rate amounts than the actual principal. After a certain time period, the interest rate amount starts reducing, with more principal amount added to the monthly installment.
The EMI for a Karnataka Bank car loan can be calculated as follows -
EMI (E) = [P x r x (1+r) ^n]/ [(1+r) ^n-1]
P = The Principal Loan Amount
R = The Interest rate charged per month. Karnataka Bank charges a fixed interest rate of 10.50% for all types of applicants. This is calculated depending on the base rate, which is currently 10.25%.
N = Number of monthly installments i.e. the number of years opted for the repayment of loan.
For a principal amount of Rs. 1, 00,000 given at an interest rate of 10.50% and a loan tenure of one year, an estimate of the total sum of EMIs that has to be paid by the borrower is Rs. 1, 04, 861, out of which the interest will be around Rs. 4861.
The following example illustrates the EMI calculation for a car loan amount of Rs. 4,00,000 to be repaid in 36 months at an interest rate of 10.50% from Karnataka Bank (Calculations based on EMIs paid in advance):
|Year||EMI Amount||Interest Amount||Principal Amount||Balance Due|
|2015||Rs. 38,665||Rs. 6,691||Rs. 31,973||Rs. 3,68,027|
|2016||Rs. 1,54,658||Rs. 32,893||Rs. 1,21,765||Rs. 2,46,262|
|2017||Rs. 1,54,658||Rs. 19,475||Rs. 1,35,184||Rs. 1,11,078|
|2018||Rs. 1,15,994||Rs. 4,916||Rs. 1,11,078||Rs. 0|
The total interest to be paid towards a Karnataka Bank Car Loan for an amount of Rs. 4, 00,000 would be Rs. 63975.
The interest rates for a Karnataka Bank car loan might be determined based on various factors and also on the applicant’s financial profile. Some of the key factors affecting interest rates are as follows -
Down Payment - Car loan borrowers should always make a huge lump sum as down payment to ensure that their loan tenure is shorter and EMI amount is less. Also, a higher down payment amount ensures that customers get better interest rates when they avail the car loan as this assures the lender that the borrower has the financial capability to repay the sanctioned loan.
Market Fluctuations - The interest rates offered for a Karnataka Bank car loan varies depending on market fluctuations. Interest rates might also go up according to the inflation rate and prospective borrowers must be ready for this when they avail a car loan. Customers might get lower interest rates when inflation is low and higher interest rates when the inflation is on the rise.
Income - Banks always prefer customers with a lower debt to income ratio. To have a good ratio, applicants must ensure that they make their repayments and card payments on time, without any break or irregularities. Customers who have a good income will be considered to be reliable with regards to repayments. This drastically reduces the interest rate for the new car loan, as the associated risk for the bank will also be less.
Car Model - The car model selected by the borrower might sometimes affect the interest rates offered by the bank. Since for a car loan, the hypothecation of the new vehicle is mandatory, banks will always consider the car model before deciding on a specific interest rate. The popularity and the resale value of the car model are also additional factors to be considered. This factor is considered, if in rare cases the borrower is unable to repay the loan back, the bank might seize the car and sell the vehicle to retrieve the loan amount. So when a customer chooses a car model, he must make sure that it fits into his budget and repayment capabilities.
Karnataka Bank always understands the financial position, debts and repayment capacity of an applicant before approving the car loan. A key component of this verification process is the CIBIL score of the applicant, which affects the application in a huge way. A credit score represents the complete financial profile of the applicant and works like the first impression for the lender. Banks look into the customer’s spending patterns, repayment capacity and regularity and volume of debts before actually processing the application further. If the applicant does not hold a good credit score, the bank might reject or offer high interest rates, thereby increasing the total cost of the loan for the customer. When a customer applies for a car loan, it is important to showcase a good score so that he gets the most affordable deal from the lender.