Do you want a car loan? Know interest rate, bank charges, SBI vs HDFC Bank vs Axis Bank vs ICICI Bank
There are many pros regarding why buyers should choose a car loan rather than investing their own hard earned money.
It is festival time and many are busy preparing their budget to purchase their favorite goods and services. Making big purchases during festive season especially Diwali is considered auspicious and India as a whole shops en masse during this period. Many also get a bonus from their companies and this goes a long way in making the deposit. This heavy investment is generally to get a new car, house or even jewellery. Coming to vehicles, almost all of us want to purchase our dream car, however, owning a car in India is a costly proposition.
Buying a car generally demands the initial impetus to be made by sizable financial aid from banks or financial institutions that have dedicated special loan products during the festive season in this regard.
There are many pros as regarding why buyers should choose a car loan rather than investing their own hard earned money. The basic issue is that cars are expensive, hence the investment is massive, which usually is not completely affordable, especially in the case of a typical middle class Indian family.
Also, there is this risk, that if a massive purchase like a car is made with liquid cash, then it may bring the buyer under the radar of Income Tax Department!
Hence, even if a buyer's savings may account for a sizable portion of the car, it is always advisable to not make an entire payment in cash, in fact a major portion of vehicle price can be paid by using car loans.
Another good reason is that, by opting for a car loan helps build credit history at banks. This helps buyers in fulfilling future loan requirement if their credit score is good.
In short, car loans in India are the surest and safest way to purchase a vehicle.
Having car loan is a simple procedure - exactly like opting for any other form of loan. You can repay your car loan in Equated Monthly Installments (EMIs).
However, while opting for a car loan, it is advisable to choose the bank or financial institution wisely. The rate of interest being charged on car loan and the amount of processing fee needs to be scanned carefully.
There can be situation where the bank may be charging a hefty interest rate. This can become burdensome in coming days when EMIs have to be repaid.
Let's understand who is offering best interest rates.
Largest private lender HDFC Bank charges interest rate ranging from 8.40% to 11.10% for loan amount which can be minimum as Rs 1 lakh for tenure of 1 - 7 years. The bank charges processing fee up to Rs 4,720.
However, if you take a loan below Rs 1 lakh, then interest rate is higher in HDFC Bank ranging from 12% to 15.5% with processing fee up to Rs 5,310.
Meanwhile, Axis Bank charges interest rate from 8.60% to 11.50% for loan amount of Rs 1 lakh between 1 - 7 years tenure. Compared to HDFC Bank, processing fee charge is higher in Axis as it is up to Rs 5,500.
ICICI Bank on the other hand, has interest rate from 8.80% to 13% on minimum loan of Rs 1 lakh for 1 - 7 years tenure. The bank charges processing fee up to Rs 5,000.
In comparison to the above private lender, the largest state-owned lender State Bank of India charges 9.30% interest rate for a tenure of 7 years. One good thing is that, the bank does not levy any processing fee without any limit on loan amount.
Compared to above mentioned banks., Yes Bank charges interest rate of 10.25% to 12.25. The processing fee charge by Yes Bank is highest between Rs 5,000 to Rs 10,000 for minimum loan amount of Rs 1 lakh for 1 - 7 years tenure.
Federal Bank has an interest rate of 9.75% on car loan with processing fee ranging from Rs 1,500 to Rs 2,500. There are no minimum limit on loan, however, tenure is between 1 - 5 years.
State-owned Bank of India charges interest rate of 9.25% with a processing fee of Rs 500 plus service tax. The loan can be taken from Rs 50 lakh to Rs 1 crore for 7 years tenure.
Just like SBI, Andhra Bank, Central Bank of India, IDBI Bank, Bank of Maharashtra and Allahabad Bank do not charge any processing fee without any loan limit. Tenure is 7 years.
However, Andhra Bank, Central Bank of India, IDBI Bank, Bank of Maharashtra and Allahabad Bank have car loan interest rate at 9.2%, 8.70%, 9.10%, 8.95% and 9% respectively.
Another state-owned lender Union Bank of India despite charging lower interest rate of 8.70% compared to SBI, has massive processing fee which is 0.50% of the loan amount plus service tax. The processing fee can be up to maximum Rs 15,000. A customer can opt up to Rs 12.5 lakh at Union Bank for 7 years' tenure.
Hence, it would be advisable to always check the interest rate and processing fee, compare it with other banks, in order to avail best benefit. Loans can provide a helping hand in times of need but can also turn out to be a nightmare when you get trapped by hefty interest rates.