Car is not only a status symbol, but it is also a necessity, especially in metro cities, where you have to regularly travel to far off distances for work. But before buying a car it is important to know how much loan you can get and what the best interest rate is for EMI currently available in the finance world. The rate of interest ultimately will decide how much you will be paying totally by the time your car loan ends. At present, the car loan interest varies between 10 to 11 percent and comes with extra charges of processing fee which can be anywhere between Rs. 3500 to Rs. 5500.
Other charges with car loans
The processing fee and other charges are also included in the car loan. The charges are levied on cheque bounce or instrument return charges, instrument or cheque swap charges, duplicate statement issuance charges, duplicate repayment schedule issuance charges, duplicate no dues certificate, late repayment penalty, re-booking, loan-cancellation, foreclosure charges, stamp duty, part pre-payment charges, and issuance of credit report.
How to choose the best car loan option?
The car loan on offer comes with the above extra charges and some other hidden costs along with the obvious interest amount. So as to choose the best from the available car loan options you need to study various loan options offered by different banks and financial institutions.
Some of the steps given here can help you in making the right choice:
The first thing you should do is zero in on those car loan options that have lower rate of interest, but while doing so you should also keep in the mind the processing fee. For example, if you are taking a car loan of Rs.10 lakh you can save approximately Rs.5000 if you prefer State Bank of India over the Syndicate Bank. This is so because the car loan of SBI is cheaper by 25p than Syndicate Bank although Syndicate Bank do not have processing fee and SBI loan comes with processing fee.
Prepayment penalty is another thing to consider. There are many banks who levy penalty on auto loans which is mostly the percentage of the existing outstanding loan amount in case you decide to prepay the loan. Take this feature into consideration in case you decide to prepay the loan amount in the future? There are selected banks such as Bank of Baroda, SBI and Corporation Bank which do not impose prepayment penalty.
Assessing affordability is another important point of consideration. There are many combination offers that are usually introduced during festive seasons. These offers combine both car and home loan together. Watch out for the total interest amount you are paying before falling for the combo scheme.