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Friday, May 27, 2005

Baby you can buy my CAR (On Car Loans) - From (Economic Times)

Baby you can buy my CAR
(Economic Times)

Surf 'N' Earn -Sign innow
Thinking of taking a loan to buy a car? Wondering who will give you the best
deal? Before taking a decision, it would be a good idea to check out the
interest rates being offered by public sector banks such as State Bank of
India (SBI). Chances are that the rates of interest being offered by the
public sector banks are a clear 1% less than those offered by private banks
through dealers and DSAs.

For metros and urban centres, SBI is offering an interest rate of 8% for a
loan of upto 3 years, 8.25 % for 3-5 years, and 8.5 % for 5- 7 years. For
rural and semi urban towns, the interest rates go up slightly. In these
centres, SBI offers 8.5% for loans up to 3 years, 8.75 % for loans upto 3-5
years, and 9% for loans up to 5-7 years. These rates are more or less
constant, and do not vary from model to model or dealer to dealer.

In comparison, the rates being offered by private banks through dealers and
DSAs are higher. For instance, a three-year loan for a Ford Ikon or a
Hyundai Santro will fetch an interest rate of around 9.5 %. The interest
rate for a Maruti 800 will be about 0.5 % more.

However, there is a catch. If you demand and negotiate hard with the
dealers, DSAs, and finance companies, they will give you a discount of
around 4- 4.5% on the loan amount.

You have a choice of either taking this as a one time cash discount on the
loan amount, or in the form of accessories, or of adjusting this in your
monthly installments in such a way that the average interest rate gets
reduced. If you demand and are able to avail these discounts, the PSU rate
of interest will become a lot less attractive, in comparison to the private

While deciding between public sector banks on the one hand and private banks
and finance companies on the other, some other factors should also be taken
into account. Private sector entities are more flexible and more responsive
to the needs of the consumers; they will send their representatives to the
doorstep of the consumer, ask for less documentation, and process the loan
application much faster. Therefore, if you are in a terrible hurry, a loan
from the private sector bank makes a lot more sense for you.

But there is one point on which public sector banks score over their private
counterparts. Unlike private entities, who impose a penalty in case of
pre-payment of loans, public sector banks generally do not charge any
penalty in the case of pre-payment. So go ahead and choose the financier
that best serves your loan needs.

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