1 min read.Updated: 02 Jul 2021, 07:41 PM ISTLivemint
Before you sign up for the loan with the lender who has partnered with your new car's dealer, check if you can get a cheaper rate elsewhere
MUMBAI: When you are negotiating the price of a car, the dealer is bound to ask you whether you want a loan? If you do, the dealer’s representative will take you to the loan desk, where, typically, you can get a loan from two-three different lenders.
Most buyers end up taking a car loan from a lender which has partnered with the dealer. It’s convenient that all services that a buyer is seeking are available under one roof. However, before you sign up for the loan with the lender who has partnered with the dealer, check if you can get a cheaper rate elsewhere.
Even a 1% difference in the loan can help you save. Suppose you want a ₹7 lakh loan. The dealer offers it at 8% for five years. Your equated monthly instalment (EMI) will work out to be ₹14,194, and the total outgo will be ₹8,51,609.
If your loan is 0.5% cheaper, your EMI will be ₹14,027, and the total loan outgo will be ₹8,41,594.
If the loan is 1% cheaper, the EMI and total loan outgo will be ₹13,861 and ₹8,31,650, respectively.
Interest rates are one part; the processing fee added to the total outgo can make a more significant difference.
Public sector banks (PSBs) are generally cheaper than private-sector lenders like in other many loan categories. At present, Punjab & Sind Bank offers the lowest rate at 6.8%, Bank of Baroda at 7%, Union Bank of India at 7.15%, Canara Bank at 7.3%, according to data from Paisabazaar.com. The lowest rate that the State Bank of India offer is 7.5%.