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How to get the best car loan in India? Avail the Cheapest car loan offers

Updated on March 19, 2016

How to get the best car loan in India? Avail the Cheapest car loan offers

Nearly 65% of all cars bought are financed through banks. In India, car loans are offered by a variety of institutions- Banks, NBFCs (Non-banking financial institutions), Finance arm of car makers (also called captive lenders) and Bank-car maker tie ups. For instance, Tata motors and Ford have their own financial arms. Maruti Suzuki finance has tie-up with 37 finance partners like SBI, HDFC, Bank of Baroda, ICICI etc. Such tie-ups can provide attractive loan offers to customers with features like low interest rates.

There are basically two types of interest rates- Fixed and floating. Mostly sector banks offer fixed interest rates as well as floating interest rates. Floating interest rates are useful where you could predict that interest rates are currently higher but are expected to fall in the coming years. If you feel that interest rates are going to increase in future, it’s better to go for fixed interest rates. Annual percentage rate (APR) is the actual rate of repayment, which includes all related charges and fees.

Loans are provided based on factors such as income of customer and his/her credit profile. A Loan is a secured product which is also beneficial for the lender. The lender can seize the car if the buyer is unable to repay the loan amount.

Who offers the lowest interest rates?

Carmaker Captive lending arms vs Banks: Captive lending Finance arms of automakers generally give better loan offers than banks. They offer tailor interest rates as well. Ford credit India offers 7.99% interest rate on Ecosport figo. The APR of 8.8% is much lower than compared to SBI’s rate of 9.85%. Further, the processing fees are also lower. Captive lending arms also offer Zero down payment facilities and Zero maintenance packages. For example, BMW offers Zero maintenance package for 3 years

However the above facilities are generally available only for select models of the carmakers

Advantage of Bank loans: Banks offer loans with long tenure, better terms for repayment and foreclosure charges. Public sector banks (PSB) don’t charge penalties for foreclosure. Processing fees are waived during festive season by most public sector banks. Private bank generally levy foreclosure charges of up to 6%. Some private sector banks don’t allow prepayment/foreclosure at all. Some banks allow part payments-Axis bank allows part payments twice each year.

How to get the best Car loan: Wait for festival offers. Most banks give attractive Diwali offers. PSBs offer lower interest rate for women borrowers. Many private banks offer interest discounts up to 1%.

Negotiate hard: You must negotiate on interest rates and processing charges. Unless you ask, you won’t get anything. Remember that customer is the boss. Decide whether you need fixed rate or floating interest rate.

Use your credit profile: If you have a good credit profile, use it to secure a better loan offer

EMI: Decide what kind of EMI you wish to avail- whether it’s lower repayments for a long period or higher repayments for a short period.

Balloon EMI: Balloon EMI enables a lump sum to be paid at the end of the loan period. It keeps the monthly payments low. It’s Ideal for those who change cars often.

Arrange financing before buying Car: The best way to maximise negotiable amount is to arrange the financing before going to buy your car. Most dealers work on a commission basis, and hence they will try to sell the car at a higher interest rate

Get quotes: Check if the car maker has any special offers/discount for the model or tie-up with any bank or NBFC for attractive interest rates. Compare interest rates from multiple lenders.

Present loan rates offered by Top banks in India

State bank of India (SBI) - 9.80% (Women), 9.85% (Men)

Bank of Baroda - 9.90%

IDBI Bank - 10.10%

Canara Bank - 9.90% to 9.95%

Vijaya Bank - 10.05%

Bank of India - 10.15%

Union Bank of India - 10.10%

Federal Bank - 9.88% to 11.33%

Indian Bank - 10.15%

Syndicate Bank - 10.35%

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    • JvicIndia profile image
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      John 14 months ago from India

      We can expect reduction in Car loan rates as RBI governor has advised cut in lending rates to banks