Getting a car loan is quickly becoming a norm for many Kenyans. Banks, car dealers and other financial institutions have loans offers to suit anyone’s needs. However, there are a number of frequently asked questions regarding car loans. The following are the popular ones with corresponding answers.
- How can I get the right 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.
- Can I choose the type of interest rate? There are two types of interest rate offered – fixed and floating. You can choose the bank which offers the one you need.
- What’s the total amount of loan am I 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 lender. They check factors such as car cost, type, and value in second hand market while deciding the amount of loan to offer. Some banks might even lend 100 per cent of the car value.
- What are the required documentations and processing time? Like any other product, you would require to submit your identity, address, 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.
- Can I negotiate the interest? Yes, interest rates for car loans are not fixed. They can be negotiated. If you are loyal customer to a bank and have made regular payments for previous loan, they might consider and revise the existing interest rate for you.
- What is the length of payment? Typical loans repayment periods span between 1 to 5 years. However, some financial institutions might offer a longer repayment period.
- Can I get a loan to buy a used car? Yes, 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.
- Will 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, etc. will be considered.
- What if don’t pay installment on time? You need to make EMI payments regularly. Most of the banks allow you to miss one or two payments. 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.