Pakistan is one of the most emerging economies in the world. It has seen its fair share of ups, downs. Due to a variety of reasons, including the Covid-19 Pandemic and a global recession, the past five years were particularly difficult. The disposable income of Pakistanis has been declining due to these economic and natural factors. These factors aside, auto financing and consumer financing saw an increase in demand due to lower discount rates. However, this trend has changed as the new monetary policies saw an increase in discount rates and the restrictions placed by the Pakistani state bank on consumer financing. The debt burden ratio was decreased and personal loans, including vehicle loans, were also reduced in tenor. The current debt burden ratio cap is currently at 40 %. Additionally, the maximum allowed lease term for vehicles was decreased from 7 years to just seven. This excludes vehicles with 1000cc or less. However, this policy change did not have the desired impact as consumers’ debt reliance has increased. Transportation is a matter of concern for everyone, regardless of whether you are salaried or business-class. Everyone wants to own a vehicle. In the race to become the best car loan bank, every bank offers both conventional financing and Islamic financing. We will be discussing the top banks that offer auto loans. The following factors are used to determine which banks are the best for auto loans: processing time, mark-up/profit rate, terms & condition, customer service, and terms & conditions.
Albaraka Bank Pakistan Limited
Albaraka Bank Pakistan Limited (ABPL) was Pakistan’s first Islamic bank. They offer vehicle loans that are based on Islamic financing, called Diminishing Musharika. The bank enters into a Musharika agreement whereby both the bank as well as the customer become joint owners. The bank charges a rent for its share in ownership. The monthly installment includes the principal repayment (takaful) and the rental amount. The musharika tenor increases and the customer’s share of the vehicle decreases until the customer owns 100%. ABPL offers one of the most affordable rental and takaful rates. Processing time is between 15 and 20 days after you submit all documents. The best thing about Islamic banks, is that you don’t have to worry about booking times. Islamic banks also have the added benefit of not charging you for the rental until the vehicle has been repaired or restored. Albarka bank has all the features to be the best bank in Pakistan for car loans.
Dubai Islamic Bank ( DIB).
DIB, another Islamic bank, has been in Pakistan for some time. Since their entry into Pakistani markets, they have been active in consumer finance. Because of their fast processing times, low profit rates and low takaful rates, they are considered one of the top banks for vehicle loans. They are also well-known for personal financing. DIB has a positive customer review and enjoys a loyal customer base for auto loans.
Bank Alfalah Limited (BAF)
Bank Alfalah is the bank that can be ranked as one of the top auto loan banks. It is widely considered the bank that challenged the limits of consumer finance in Pakistan. Their consumer lending was once extremely high, and was considered high-risk by risk analysts. This changed over time as Bank Alfalah became a mature bank and established policies to reduce its market risk. BAF provides vehicle financing in both Islamic and conventional modes. It has a lower, but still competitive, mark-up rate than other traditional banks. The processing time is between 15 and 30 days. BAF is a pioneer in auto financing. It has a large portfolio. Although there are some complaints from customers about the service, overall customer satisfaction has been positive. Overall, BAF is a top bank for Car loans.
Meezan Bank Limited ( MBL)
Albaraka bank is Pakistan’s first Islamic bank, but Meezan Bank was the one that made a significant contribution to the development of Pakistan’s Islamic banking sector. They are the most trusted bank for car financing in Pakistan, regardless of whether they are serving the corporate or consumer sectors. Meezan has a competitive profit and takaful rate, but their processing times are longer than other banks due to its large client base. Meezan is still the preferred choice for consumers interested in car financing. Another reason for this preference is the trust Meezan has earned over the years.
JS Bank Limited (JSBL).
JSBL is a traditional bank that offers many types of consumer financing, including auto financing. You can also add a coborrower to your auto loan, which reduces your debt and makes you more eligible for financing. JSBL is a smaller bank than other banks but has innovative ideas and offers. Although the mark-up rates may be a bit higher than those of other banks, they are still competitive. The processing time is between 15 and 25 days. Their services have received mostly positive customer reviews.