Bank Islam car loan settlement is a process where a borrower pays off their outstanding vehicle financing with Bank Islam Malaysia Berhad before the end of the loan tenure. This facility is part of Bank Islam’s Vehicle Financing-i, which operates under the Islamic financial concept of Murabahah. By settling the car loan early, borrowers may benefit from a rebate on the remaining financing period, which reduces the overall cost of borrowing.
Bank Islam Car Loan Early Settlement
How Does the Bank Islam Early Settlement Process for Car Work?
To settle a car loan early with Bank Islam, borrowers must first contact the bank to get the exact settlement amount. This will include any outstanding principal, profit charges, and possible rebates. The rebate, also known as Ibra’, is a reduction in the profit portion of the financing that the borrower would have paid over the remaining period of the loan.
For instance, if a borrower decides to pay off their car loan after three years of a nine-year term, they may receive a rebate on the profit charges for the six years they will no longer be paying. The calculation of the rebate is based on the “Sum of Digits” method, a common practice in Islamic financing.
What Are the Benefits of Settling a Car Loan Early?
Settling a car loan early can offer several benefits to borrowers. Firstly, it reduces the total interest or profit paid over the life of the loan, thus saving money. Secondly, it eliminates monthly instalments, freeing up personal cash flow and reducing financial stress. Moreover, having a fully-owned vehicle without any outstanding loan can improve a borrower’s credit profile, potentially making future borrowing easier and more favorable.
Additionally, early settlement can protect borrowers from potential financial difficulties that might arise due to unforeseen circumstances. By removing the debt obligation, borrowers can manage their finances more flexibly.
What Are the Eligibility Requirements for Bank Islam Vehicle Financing-i?
To be eligible for Bank Islam Vehicle Financing-i, applicants must be Malaysian citizens aged between 18 and 60 years at the end of the payment period. The bank requires applicants to have a fixed income, with a minimum annual income of RM24,000. Applicants must provide necessary documents, including a copy of their identity card, driving license, latest salary slips, and bank statements.
Bank Islam also considers the applicant’s credit character, past payment patterns, and legal capacity when approving a loan. The approval process follows the guidelines set by Bank Negara Malaysia and Bank Islam Malaysia Berhad.
What Types of Vehicles Can Be Financed?
Bank Islam Vehicle Financing-i covers a wide range of vehicle types, including national, non-national, hybrid, electric, and unregistered reconditioned models. The profit rates vary depending on the vehicle type, with rates for national vehicles ranging from 2.50% to 3.30% per annum and as low as 2.10% for electric vehicles.
For used vehicles, the rates are determined based on the vehicle’s age, with rates starting from 3.65% per annum for vehicles aged between 1 to 5 years, and 3.92% for those aged between 6 to 10 years. This flexibility allows borrowers to choose a financing option that best suits their needs and budget.
What Are the Fees and Charges Involved?
Bank Islam imposes several fees and charges associated with vehicle financing. These include a stamp duty fee of RM20, and a late payment charge known as Ta’widh, which is 1% per annum on overdue instalments before the maturity of the facility. After maturity, the charge is equivalent to the prevailing daily overnight Islamic Interbank Money Market Rate on the outstanding balance.
There is no lock-in period for the financing, and the bank grants Ibra’ on the deferred profit after full settlement. It is important for borrowers to understand these charges to avoid any unexpected costs during their financing term.
How Important is Takaful Coverage in Vehicle Financing-i?
Takaful coverage is a critical component of Bank Islam’s Vehicle Financing-i. Borrowers are legally required to undertake comprehensive Motor Takaful coverage for the entire financing tenure. This coverage protects both the borrower and the bank from financial losses resulting from damage to the vehicle or liability to third parties.
Additionally, borrowers may opt for an Auto Financing Takaful Plan, a personal accident coverage that provides further protection. Having Takaful coverage ensures peace of mind and financial protection throughout the loan period.
What Happens If I Fail to Make Monthly Repayments?
Failing to make monthly repayments on time can lead to late payment charges and potentially affect the borrower’s credit profile. Bank Islam charges a 1% per annum Ta’widh on overdue instalments. If payments are delayed for more than two months, the bank may have the right to repossess the vehicle.
It is crucial for borrowers to maintain consistent payment habits to avoid these penalties. In case of financial difficulties, borrowers should communicate with the bank to explore possible solutions before falling behind on payments.
How Can I Apply for Bank Islam Vehicle Financing-i?
Applying for Bank Islam Vehicle Financing-i involves several steps. Prospective borrowers should gather the necessary documents, including identity verification, income proof, and bank statements. The application process can be initiated online or by visiting a Bank Islam branch.
Once the application is submitted, the bank will assess the applicant’s eligibility based on their credit history, income level, and adherence to Bank Negara Malaysia’s guidelines. If approved, the loan will be processed, and the borrower will be informed of the next steps.
What Are the Key Considerations Before Opting for Early Settlement?
Before opting for early settlement, borrowers should consider the financial implications. Evaluating the total rebate on deferred profit and the exact settlement amount is vital to ensure that early repayment is financially beneficial. Borrowers should also consider their current financial situation and future financial commitments.
Consulting with a financial advisor or using online calculators can help borrowers make informed decisions by providing a clear picture of potential savings and costs associated with early settlement.
How Do I Stay Updated on Profit Rates and Financing Terms?
Staying updated on profit rates and financing terms is essential for borrowers to make informed decisions. Bank Islam regularly revises its indicative profit rates, which can affect the cost of borrowing. Borrowers are encouraged to frequently visit the Bank Islam website or subscribe to financial newsletters to receive the latest updates.
Being well-informed enables borrowers to anticipate changes and adjust their financial plans accordingly. Engaging with financial platforms like RinggitPlus can also provide valuable insights and comparisons of different financing products available in the market.
Does Bank Islam Offer 90% Financing Options?
es, Bank Islam offers up to 90% financing for various types of vehicles, including national, non-national, and electric vehicles, with profit rates starting as low as 2.10% per annum. Bank Islam’s Vehicle Financing-i provide customers with competitive rates and a transparent structure, with no hidden fees. Y The bank also provides a fixed selling price, meaning all costs are disclosed upfront, giving borrowers a clear understanding of their financial commitments.