Monthly Motor - June 2014

Car Loan
financial institutions offer loans to purchase
used or second hand cars. However, interest
rates would be slightly higher for such cars.
Other factors such as repayment capacity, car
value, etc. would be considered as they do for
a new car. It is mandatory to take a comprehensive
car insurance cover anytime you have
a loan outstanding, to cover the lender in the
case of a loss. Insurance covers for cars vary
with firms like UAP, CIC and Britam currently
leading in innovative motor insurance covers
that accords you the benefits including car hire
in the case of accidents.
Car Loan FAQs
Getting a car loan is quickly becoming
a norm for many Kenyans.
Banks, car dealers and other financial
institutions have loan offers to
suit anyone’s needs. However, there
are a number of frequently asked questions (FAQs)
regarding car loans. The following are the common
FAQs with corresponding answers.
1. How do I get a car loan? Research on the
offers available in the market and compare the
terms, rates, and regulations on payments. You
can ask friends and family for advice as well.
Most banks like Barclay, KCB and Bank of
Africa- Kenya have loans specifically tailored
for car buyers, both new and used.
2. Can I choose the type of interest rate?
There are two types of interest rates on offer
- fixed and floating. You can choose the bank
which offers the type you need.
3. What’s the total amount of loan I am
eligible for? Most financial institutions offer
up to 90 per cent of the car value as auto loan.
However, the final value might vary with the
lender and your ability to pay. The bankers
consider factors such as car cost, age, type, and
value in the second hand market while deciding
the maximum amount of loan to offer. Some
banks might even lend you 100 per cent of the
car value, if your credit records support this.
4. What are the required documentations
and processing time? Like any other product,
you would require to submit your personal
identification number from KRA, national
identity card, utility bill as proof of regular
residence, residence address, employment and
income proofs along with the loan application.
After submission of the documents, it takes
about 3-7 days for processing the loan and getting
it sanctioned.
5. Can I negotiate the interest? Yes, interest
rates for car loans are not fixed. They can be
negotiated. If you are a loyal customer to a bank
and have made regular payments for previous
loans, this will be considered. The revised rate
will also be influenced by your holding some
fixed deposits with the bank.
6. What is the length of repayment? Typical
loans repayment periods span between 1 to
5 years. However, some financial institutions
might offer a longer repayment period.
7. Can I get a loan to buy a used car? Yes,
8. Can my loan application be rejected?
There are chances of your loan application
getting rejected if you have a bad credit score.
This might happen if you have applied for
loans/credit cards multiple times, defaulted on
previous loan payments, etc. If this is the first
loan application, other factors such as income,
organization you work for, your employment
records, etc. will be considered. Most banks
treat and consider small business owners as
high risks due to the unpredictability of the
SMMEs. Deal with the bank where you have
good relationship. A number of motor dealers
have own in-house finance packages that could
help, where the large banks may not. Toyota
Tsusho is one such finance available for car
buyers.
9. What if I don’t pay instalment on time?
You need to make repayments regularly. Most
of the banks allow you to miss one or two
repayments. Kindly inform the bank in case
of defaulting long before you actually miss out
on the repayment. This will put you in good
standing with the bank, just as you would with
delayed payment on your credit card. However,
beyond that you may be treated as a defaulter.
They would have the authority to seize your car.
Also, in case you default on the payment, your
credit score will also take a hit and reduce your
chances of loan eligibility in the future.
10. When does the title pass to me? It is
a practice that the log book is kept with the
lender, along with the signed transfer documentations,
until you complete the repayment. The
title of a car purchased on loans rests with the
lender, never the buyer, hence the mandatory
car comprehensive insurance.
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MOTOR JUNE 2014