A car loan is the most common and convenient solution for buying a new or used car. That’s the reason why more than 80% of buyers apply for car finance in India. Before selecting a bank or financing firm, it’s important to search or investigate around for the best available options. We have several banks and financial institutions which are offering loans, and each one of them claims to be better than the rest. And this makes choosing a right bank for a car loan even more difficult.
So to help you chose the best car loan bank in India, here’s what you need to take care of.
Eligibility and ease: Banks have stricter eligibility criteria than the private finance companies or car manufacturer’s finance arm. For example, most banks provide loans to the borrowers who have minimum annual income of Rs. 2.4 lakhs, while a private finance company requires minimum income of Rs. 1.5- Rs. 2 lakhs. However, the car loan taken from a car finance company has to be paid back within a maximum time period of five years. The banks, on the other hand, offer a maximum seven years of loan period.
Interest rate card: The next determining factor is the interest rate. The banks’ car loan interest rates in India remain same for most customers, while the car finance companies work on a preferential basis. The private firms’ interest rate depend on several parameters such as tenor and product, risk profile or just to support the product sales of the car manufacturing company.
Loan charges: To select the best bank for car finance in India, it is important to compare the primary cost details of the loan – i.e. processing fee, prepayment charges and late payment penalty. Processing fee varies with banks and car finance companies. Generally, it depends on the total amount of the loan. Most government banks like State Bank of India, Bank of India, Bank of Baroda, Canara Bank and Federal Bank don’t charge for prepayment. While, the private players including Axis Bank Ltd, HDFC Bank Ltd and ICICI Bank impose prepayment charges. The late payment penalties are the same for both categories of borrowers.
While selecting a bank and applying for a car loan in India, compare them on the basis of their total cost of the loan and EMIs, eligibility criteria and interest rate.
