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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
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Public sector banks (PSBs) are generally cheaper than private-sector lenders like in other many loan categories

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%.

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

Some of the banks that offer lower processing fees include Union Bank of India ( 1,000), IDBI Bank ( 2,500), and Federal Bank ( 1,500 – 2,500).

Hence, when you evaluate loan offers, consider interest rates along with other charges.


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