One of the most reliable indicators of a robust economy with consistent growth is a corresponding increase in the rate of car ownership. With all the most credible and trusted sources ranging from multilateral lender the World Bank to credit rating agency Moody's predicting strong economic performance in Bangladesh for the foreseeable future, allied to the economy's upward direction over the last decade that has seen GDP grow at an average of 6 percent per year while per capita income more than trebled to $1610, that should mean car ownership is booming in the country.
And as we learn in this week's special feature on the Best Banks for Car Loans in Bangladesh 2019, banks stepping forward to facilitate the increased purchasing power of the population have meant exactly that.
The Bangladesh Reconditioned Vehicles Importers and Dealers Association, or Barvida, reported in 2018 that on average almost 63 cars are sold in Bangladesh everyday - the highest in the country's history - with the number of imported cars having increased threefold since the 2012-13 fiscal.
According to Barvida, around 7,353 reconditioned cars were sold in 2012-13, rising to 20,149 in 2016-17.
The number rose again in the 2017-18 fiscal, the last year for which data is available, to 23,102.
The emergence of easier credit to facilitate the purchase of cars is almost universally held up as one of the most important factors behind the exponential growth in demand for cars. Commercial banks have slashed interest rates on consumer loans, including car loans, to create a foothold in what is a highly competitive market, and that has worked to the benefit of consumers. Even just five years ago, car loans would be pegged with an interest rate as high as 15-16%. But as we'll see in the Best Banks for Car Loans in Bangladesh 2019, that number has now come down to 10-12% in the competitive end of the market. Quite simply, there has never been a better time to buy a car in Bangladesh. So what are you waiting for? Owning a personal car is no more a luxury rather a crying need in the context of woefully poor public transport services in Bangladesh. Especially in the capital city, people are regularly facing transport dilemmas like unavailability, unfit vehicles, exorbitant transport fares, and many other unexpected situations like sexual harassment, pick pockets, etc.
Thankfully several reputed scheduled banks in the country are currently offering Car Loan Deals in Bangladesh under easy attainable conditions. Nine out of 10 cars are sold with at least some credit component, and this of course holds true the world over, making car loans one of the most widespread consumer loan products in the world. In Bangladesh, bankers say repayment rates hover at a dizzying 98 percent. However, before accessing car loans from any bank, some real-life facts are needed to be considered from the perspective of both the bank (lender) and client (borrower). Comparison of Best Banks for Car Loan in Bangladesh 2019 Our team has carried out detailed online research as well as first-hand survey on several well-known scheduled banks in Bangladesh to explore their car loan deals. Table: Lucrative Car Loan Deals in Bangladesh Offered by Different scheduled Bank Source: Data Collected from Internet and First Hand Survey 2019. How to Choose the Best Car Loan Deals in Bangladesh? Nowadays a significant number of private banks are offering great Car Loan Deals in Bangladesh. However, not every car loan deal is suitable for everyone. Don't miss the following essential parameters to avail the most suitable car loan complying with your specific requirements. Interest Rate and EMI The higher the interest rate the greater the liability.
The rate of interest on car loan fluctuates depending on respective bank policy. It is behooved upon you to pick the bank with the most flexible interest.
The above diagram represents the initial interest rate on car loan set by different banks in Bangladesh. On average, the initial rate of interest hovers around 11 percent. Some banks (like Pubali Bank and Premier Bank) demand 10% interest rate, which is comparatively low. However, for a few banks like AB Bank Ltd., the maximum interest rate might rocket up to 17.5 percent.
The EMI (Equated Monthly Installment) is calculated for each client individually on the basis of total borrowed amount, loan tenure, rate of interest, etc. Lowest and Highest Range of Loan Amount Not every individual is seeking for the same amount of loan. Researching a group of renowned Banks in Bangladesh we found that the banks usually disburse car loans starting from about 3,00,000 BDT.
The maximum loan amount is another significant factor for choosing the best banks for car loan in Bangladesh 2019. Now how much money will you get for a car loan? Actually, the car loan amount differs from bank to bank. Our research shows that usually the banks in Bangladesh sanction car loans with the maximum limit of 40, 00,000 BDT. However, there are exceptions. For instance, HSBC Bangladesh won't allow car loan exceeding 20, 00,000 BDT; whereas, Premier Bank Ltd is willing to offer 50, 00,000 BDT for car loan. Ratio of Loan Amount to Car Value Not everyone is dreaming to buy the same model of car.
A s the cars differ in models, their values differ as well. Here comes the significance of considering 'loan amount' to 'car value' ratio to pick the Best Car Loan Deals in Bangladesh 2019. Suppose! You are willing to buy a car valuing about 1, 00, 00, 000 in BDT. Now, you can avail as high as 50, 00,000 BDT, when your chosen Bank offers 50% of the Car Value as the loan amount. Our research reveals that several renowned Banks in Bangladesh including EBL, BRAC, Premier, AB, Bank Asia, and South East are offering around 50% of the car-value under their respective auto/car loan policy. While some other top-notch banks come with more lucrative opportunities. For instance, IDLC Auto loan and Pubali Bank Car Loan can cover up to 80% and 60% of the car value respectively. You can consider these options to get an expensive car. However, HSBC won't allow more than 30% of the car value.
Therefore, choose the right bank for car loan considering your precise need. Loan Repayment Tenure Staring from a minimum 12 months, the clients generally avail 5 to 6 years period for repaying their respective total loan amount including interest. However, the loan tenure can be reduced depending on the maximum limit on age. For example, according to the Car loan policy of AB Bank, the utmost age limit of availing car loan is not more than 65 years on loan-maturity. So, if you are a 64 year old person, you can still apply for a car loan. But in this case, you would get only one year for repaying the total loan amount. Mortgage Requirements Some well-known scheduled banks in Bangladesh require their clients to hold FDR (Fixed Deposit) or any other property as mortgage against the applied Car Loan. If you are not interested in taking the car loan against mortgage than choose a bank who doesn't have any obligation for mortgage in their loan disbursement policy. What the Banks Look for Before Approving Car Loan? Banks are willing to provide car loans to the deserved clients if their specific criteria are fulfilled. Let's discuss what the banks usually look for into the profile of prospective clients who applied for car loans. Maximum Allowed Debt Burden Ratio (DBR) DBR is one the most crucial factors considered by the scheduled banks in Bangladesh before approving any car loan application. This parameter is calculated as ratio of an individual's total debt (loan and expenditure) to his/her income (monthly). In other words, DBR indicates the burden of one's liabilities over one's earning. For Example: An individual earns 18,000 BDT per month.
His/her monthly liabilities are as follows Installment (Monthly) on Personal loan = 2,500 BDT Installment (Monthly) on Car Loan = 4,200 BDT 5% of the Total Credit Card Limit = 3800 BDT Debt Burden Ratio (DBR): Monthly Recurring Debts (Liability) /Monthly Income Total Monthly Recurring Debts = 2,500 + 4,200 + 3,800 = 8,500 Monthly Income = 18,000 Debt Burden Ratio (DBR) = (10,500/18,000 = 0.58333 x 100 = 58.3% Surveying several eminent banks in Bangladesh we came to the findings that most of the banks choose potential clients who have lesser DBR values. It seems that the higher the Debt Burden Ratio (DBR) the lower the possibility of getting a car loan. Therefore, review the Best Car Loan Deals in Bangladesh to find a suitable offer that complies with your DBR profile. Our survey shows that the banks usually approve car loans for clients keeping the DBR limit within 40 to 50%. Thankfully, a few banks like Eastern Bank limited (EBL), and Premier Bank allow up to 60 to 65% DBR for passing car loans. However, some banks expect lower DBR profiles. For example, Pubali Bank doesn't provide Car Loans when a client's DBR exceeds 33%.
Age Limit for Approving Car Loan Different banks have different policies to set the minimum age limit for loan application. If the income profile is satisfactory some banks like Premier, South East, AB are ready to offer car loan to individuals aging minimum 18 years. Generally, Most of the banks are comfortable to approve car loans for 25 years or older clients.
According to the Government policy no individual can apply for loan after his/her retirement from office. Depending upon respective company rules the age of retirement in Bangladesh varies among 60 to 65 years. Usually, the scheduled banks in Bangladesh offer loans to prospective clients aging utmost 65 years. However, the age must not exceed 65 years before the maturity of car loan. This is certainly a great opportunity for the senior citizens! Minimum Required Income Level Usually, the banks in Bangladesh eagerly offer car loans to individuals who earn handsome amounts at the end of the month. However, the lowest margin of income for potential client is different for salaried persons, professionals, self-employed persons, business men and landlords. On the hunt for best banks for car loan in Bangladesh we found that a few banks (Like Brac Bank and Bank Asia) sanction car loans for individuals with minimum monthly salary of 25,000 BDT. But on average, the banks in Bangladesh expect potential clients for car loan who can make 30,000 to 40,000 BDT per month. However, the banks expect a bit higher monthly earning for self-employed persons and business owners. Length of Work Experience While reviewing any car loan application, the scheduled banks of Bangladesh highly emphasize on the job profile of the potential clients. Not all banks have similar requirements.
The minimum length of required work experience varies depending on the nature, type and status of service or employment. For instance, job experience requirement are a bit flexible for the Government officials, renowned business owners, successful self-employed persons, etc. Car Category Generally, the scheduled Banks of Bangladesh offer Car Loan for new and reconditioned cars available in the showrooms. In case of reconditioned cars, the model of car shouldn't be older than five years. However, only a few institutions like IPDC approve Auto Loan for used cars. Bottom Line A good car can resolve your daily transport crisis escalating your social status simultaneously. Owning a personal car is a long cherished desire for many people in Bangladesh.
And, a lucrative car loan deal can make this dream come true. Our research reveals that Premier Bank Car Loan offers maximum loan amount (50, 00,000 BDT) under the lowest interest rate (10%). IDLC is one of the best banks for car loan in Bangladesh covering highest loan amount to car value ratio (80%). What if, you are 18 and dreaming for own car! Premier Bank, South East Bank and AB bank can approve your loan, if your earning profile is excellent! Young professionals earning at least 25,000 BDT/month can avail car loans from Brac Bank and Bank Asia. Bank Asia, AB Bank, and Brac Bank require only one year work experience for salaried individuals. Especially, AB Bank is quite flexible about work experience for government officials, prominent business owners, and prosperous self-employed people. If you have already taken another loan or have high liability, then your DBR (Debt Burden Ratio) value would be high.
Don't panic! You can still apply for car loans from EBL and Premier Bank who allows higher DBR values - up to 60 to 65%. However, any kind of loan may create huge financial burden upon an individual if the associated policies are not evaluated properly before accessing the loan. Before applying for a Car Loan, it is highly recommended to compare the relative conditions, like Debt Burden Ratio (DBR), salary and age requirement, provided loan-amount in percentages of the car value, interest rates, Equated Monthly Installment (EMI) rate, loan repayment tenure, etc. You can also consult with the experienced professionals to find out the right bank or financial institution for availing a potential car loan that conforms to your precise needs. This feature has covered a handful of the car loan offers provided by different t scheduled bank's i n Bangladesh . Due to various constraints, we have confined ourselves to the most competitive end of the market, as revealed during the course of our research. We shall be grateful if readers or banks themselves are able to inform us of an offer we may have missed, that comes in at a lower interest rate than the ones we have covered in this edition of the Best Car Loan Deals in Bangladesh. Hope it helps you all to get driving!
© Pakistan Press International, source Asianet-Pakistan