Let's analyze the car loan offer by some of the prominent banks from the public and private domain and find out the institution that is providing a better deal for the customers. Following are the charges and offers by various banks in prevailing market situation:
Public sector banks:
Period of loan: 12 to 84 Months
Interest rates: 11 to 17%
- Up to 2.5 Lacs : Rs.2000/-
- 2.51 to 4 lacs : Rs.3000/-
- > 4 Lacs :Rs. 3500/-
Other charge: Late payment penalty :2% per month
- 6% of Principal Outstanding(POS) if
- 5% of POS for pre-closures within 13-24 months from 1st EMI,
- 3% of POS for pre-closures post 24 months from 1st EMI
- No foreclosure allowed within 6 months from date of availing the car loan
Period of loan: 12 to 60 Months
Interest rates: 12.5% to 15%
Processing charge: Rs 3500 to Rs 5500
Otehr charge Late payment penalty :2% per month
- Foreclosure within 6 months- 10% of the outstanding loan amount
- Foreclosure after 6 months- 5% of the outstanding loan
Period of loan: 12 to 60 Months
- Up to 23 months-15.75% to 17.00%,
- For 24 months to 35 months-13.75% to 16.00 %,
- For 36 to 60 months-11.5% to 14.75%
- For Loan amount:
- 2.5 to 9.9 Lac- Rs 3500 to 4200
- > 10 Lac- Rs 5000
- Documentation charges Rs 350/- extra for all loan amounts
Other charge: 2% per month on the outstanding installment
Prepayment clause: 5% of principal outstanding or Interest outstanding for unexpired period of the loan, whichever is low.
Note: Part prepayment not allowed
Public sector banks
Period of loan: Up to 84 Months
Interest rates: 10.75%
Processing charge: .51% of loan amount with a condition of minimum Rs 1020 and maximum Rs 10200/-
Other charge: No Penalty for loans up to Rs.25,000/-.
Above Rs.25000/- : If irregularEMI/Installment for one month,then penalty@2% p.a. (over and above the applicable interest rate) on the overdue amount for the period of default
Prepayment charge: Pre Payment Penalty is waived
Oriental Bank Of Commerce
Period of loan: Up to 60 Month.
Interest rates: Loan tenure within 3 year:11.4%, after 3 year: 11.65%
Processing charge: 0.50% of loan amount with a minimum of Rs.500. +Service tax, if any.
Other charge: NA
Prepayment charge: Prepayment Penalty / documentation charges/ upfront fee- NIL
Data Source: Data taken from Respective Bank's Website as on 23rd August 2012
The above-mentioned data help in drawing the criteria to select the most suitable bank. The rate of interest is an important point that differentiates banks while opting for a new car loan. Here we can see that the interest rate charged by the public bank is substantially low while compared to private banks. SBI's interest rate is around 10.75% for its new car loan whereas the lowest rate charged by private banks is 11%.
Most of the public banks have relaxed the customers for the prepayment penalty whereas private banks are charging a good amount if the loan is wrapped up earlier than schedule. The processing charges by the public banks are also lower than private banks.
To conclude we can say that the recent ups and downs in an interest rate have created a wide gap between the Public and Private bank. Monetary benefit seems to be more while selecting a public bank for a new car loan, but one should also keep in mind the average level of service quality provided by these banks. Private Banks always get an edge over public banks while it's a matter of service quality. If the customer is ready to pay more and doesn't want to negotiate with the services, then private banks are ahead of public banks.
On the other hand, the monetary benefit is substantial with a public bank. If the customer is desirous to take a loan for long duration and there is no hurry, then go for a public bank whereas if there is immediate requirement and that too for a short period, then private banks can fulfill the needs.