In general, the economic implications of car ownership are multifaceted, encompassing both substantial costs and potential benefits. While the financial burden of purchasing, insuring, fueling, and maintaining a vehicle can be significant,
Prospective car owners should carefully consider their financial situation, driving needs, and long-term goals when deciding whether to invest in a vehicle.
In Pakistan’s specific scenario, buying a car is a significant achievement for people in Pakistan but financial challenges often make it difficult for many of us to fulfil this dream.
Fortunately, there’s a solution: you can get a car with the support of banks and leasing companies and pay back the loan in instalments. Famewheels Car Financing in Pakistan offers seamless solutions to help you own your dream car with flexible payment options and competitive interest rates.
Here’s an overview of obtaining a car loan in Pakistan and how you can improve your credit score to increase your chances of approval.
Auto Loans Scenario – Pakistan
Auto loans usually cover up to 70-85% of the car’s value and buyers pay the rest as a down payment. Borrowers then repay the loan amount in fixed monthly instalments over an agreed period.
Types of Auto Loans in Pakistan
In Pakistan, auto loans are primarily categorized into:
- Conventional Auto Loans and
- islamic Ijarah Financing.
Conventional loans involve fixed or variable interest rates and require a down payment of around 15-30%. Islamic Auto Financing, on the other hand, is Shariah-compliant and uses models like Murabaha, where the bank buys and sells the car at a profit, or Ijara, a lease-to-own structure.
Standard Conventional Auto Loans
Conventional auto loans operate on an interest-based system, where you borrow a sum to purchase a vehicle and repay it in monthly instalments with added interest.
Key Features
Flexible Repayment Periods: Typically range from 3, 5 & to 7 years.
Eligibility: Requires proof of income and a good credit history.
Advantages
- Straight forward financing with predictable repayment terms.
- Interest-based transactions. For those who opt for it with a No Objection approach).
Islamic Mode of Ijarah Financing – A Shariah-Compliant Alternative
Ijarah, which means “leasing” in Arabic, allows customers to use a car while the bank retains ownership until the lease period ends or the financing agreement is completed.
- Key features of Islamic Ijarah financing include:
- Payments are treated as rent.
- Clear terms and conditions ensure a fair and ethical agreement.
- Customers can acquire car ownership at the end of the lease term.
Criteria to become eligible for Auto Financing
- While criteria vary between banks, most institutions require:
- Must be a Pakistani National Identity Card Holder
- Age: 21 years or older at the time of loan application, up to a maximum of 60 years or retirement age, whichever is lower.
- Proof of employment or business ownership for self-employed individuals
- Bank Statements (typically from the last 6 months)
- Vehicle Details (if you’ve chosen the car already)
Conclusion
Getting your dream car in Pakistan is now easier than ever with auto financing. You first need to assess your credit score and choose the financing option that suits you best before finalizing the deal. These crucial steps can minimize overall financial stress, allowing you to drive your dream car with confidence.
