Loan interest

Check which lenders are offering the best interest rates on new car loans

MUMBAI: When buying a new car, the dealership will likely ask you if you need a loan. In this case, they will direct you to a loan office where different lenders offer loans.

Most buyers end up taking out a car loan from a lender who has partnered with the dealership because it is convenient that all services are available under one roof. However, before you take out the loan from the lender who partnered with the dealership, check to see if you can get a cheaper rate elsewhere.

Even a 1% difference in the interest rate can help you save. Suppose you want a Loan of 7 lakh, the concessionaire offers it at 8% for five years. Your equivalent monthly payment (EMI) will turn out to be 14 194 and the total expenditure will be 8,51,609.

If your loan is 0.5% cheaper, your IME will be 14,027 and the total loan amount will be 8 41 594.

If the loan is 1% cheaper, the EMI and the total loan amount will be 13 861 and 8 31 650, respectively.

Besides the interest rates, the processing fee added to the total expense can make a bigger difference.

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Public sector banks (PSBs) are generally cheaper than private sector lenders in several loan categories. At present, the lowest interest rate offered by the Bank of Baroda offers is 7%, Union Bank of India at 7.15%, Canara Bank at 7.3%, according to data from Paisabazaar.com. The lowest rate offered by the State Bank of India is 7.5%.

In private banks, ICICI Bank and HDFC Bank respectively offer 7.9% and 7.95% as their lowest rates.

Some of the banks that offer lower processing fees include Union Bank of India ( 1000), IDBI Bank ( 2500), and the Federal Bank ( 1,500 – 2,500).

Therefore, when you are evaluating loan offers, consider interest rates as well as other fees.

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