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Planning a car loan? Pay maximum down payment

August 28, 2019 08:15 IST

This will reduce your interest cost over the tenure of the loan. It will also allow you to opt for a lower tenure or lower EMI, suggests Sanjay Kumar Singh.

Photograph: Kind courtesy Todd Lappin/Creative Commons

Try to limit the loan to an amount such that the EMI does not exceed 15-20 per cent of your take-home salary.

Remember that you would have other loans also and the EMIs of all of them should together not exceed 50 per cent of your take-home salary.

The car loans available within the dealer's premises may not be the most attractive.

Scout around for better deals on your own despite pressure from the dealer to take a loan from one of his lender partners.

 

Many public sector banks offer attractive interest rates (see table below) starting at below 9 per cent.

Pay the maximum down payment you can afford.

This will reduce your interest cost over the tenure of the loan.

It will also allow you to opt for a lower tenure or lower EMI.

Use online tools to compare car loan rates.

Keep in mind the foreclosure charge.

If it is high, you will have difficulty in closing your loan early.

Business owners can deduct the interest paid on a car loan when filing their tax returns.

Salaried people do not enjoy this benefit.

Sometimes, you can get a better deal if you approach a bank towards the end of the month, when they have their monthly target to meet.

Rates and charges: Car loan
Oriental Bank of Commerce
Interest rate (%) 9.05 - 9.15
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,391 - 10,415
Processing fee (Rs) 500 - 7,000
Financing Upto 85%**
Maximum Tenure 10 years
   
State Bank of India
Interest rate (%) 9.15 - 12.50
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,415 - 11,248
Processing fee (Rs) 500 - 3,750
Financing Upto 90%** (Upto 100% under specific schemes)
Maximum Tenure 7 years
   
Axis Bank
Interest rate (%) 9.05 - 11.30
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,391 - 10,946
Processing fee (Rs) 3,500 - 5,500
Financing Upto 100% **
Maximum Tenure 8 years
   
HDFC Bank
Interest rate (%) 9.65 - 10.6
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,537 - 10,771
Processing fee (Rs) 3,000 - 10,000
Financing Upto 100% **
Maximum Tenure 7 years
   
Bank of India
Interest rate (%) 9.20 - 9.60
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,427 - 10,525
Processing fee (Rs) 500
Financing For amount upto 10 lacs : 100% on ex-showroom price ' For amount above 10 lacs : Up to 85%**
Maximum Tenure 7 years
   
Punjab National Bank
Interest rate (%) 8.9 - 9.35
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,354 - 10,464
Processing fee (Rs) Upto 1,500
Financing Upto 90%**
Maximum Tenure 7 years
   
United Bank of India
Interest rate (%) 8.95 - 9.75
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,367 - 10,562
Processing fee (Rs) 600 - 11,800
Financing Upto 85%**
Maximum Tenure 6 years
   
Allahabad Bank
Interest rate (%) 8.8 - 11.05
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,330 - 10,883
Processing fee (Rs) Upto 8,696
Financing Upto 85%**
Maximum Tenure 7 years
   
Canara Bank
Interest rate (%) 8.9 - 9.55
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,354 - 10,513
Processing fee (Rs) 1,000 - 5,000
Financing Upto 90%**
Maximum Tenure 7 years
   
UCO Bank
Interest rate (%) 8.8 - 9.05
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,330 - 10,391
Processing fee (Rs) Upto 1,500
Financing Upto 85%**
Maximum Tenure 7 years
   
Indian Overseas Bank
Interest rate (%) 9.15
EMI (Rs) Loan amount - 5 lakh ' Tenure - 5 years 10,415
Processing fee (Rs) 500 - 10,000
Financing Upto 90% of vehicle's cost
Maximum Tenure 7 years
**Percentage of vehicle's on-road price
Source: Paisabazaar.com

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Sanjay Kumar Singh
Source: source
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