Which car loan to go for BOI \ SBI \ HDFC ?

[Axe77]

You could try BoB - they have no prepayment charges either although their interest rate seems higher than the SBI scheme.

If you are looking to prepay the loan sooner, it may be a good idea to get the break up of the EMI schedule up front from the shortlisted banks. That way, you can actually see at any point in the loan life cycle how much has been allocated towards principal and how much towards interest (regardless of the claimed interest rate being applied). While claimed interest rate is important, its equally important to check how much amount in each EMI is being allocated towards Principal.

As for HDFC, I've decided to completely steer clear from the pvt banks after my last experience with HDFC. On my last car loan, I prepaid HDFC with about 6 EMIs left. I dont know what kind of computation HDFC applies but the amount they asked me to pay as prepayment was actually a little higher than the total amount I would have paid as 6 EMIs had the loan simply carried on normally. That's sounds like highway robbery to me.

For the next car loan, its definitely a PSU bank for me, despite any additional waiting periods if any.

[amanmalhotra]

Thanks HappyWheels and Kuttapan, I will just wait for another few days to figure out if the loan has been approved or not (do not see a reason why they would reject it, but still). Having another bank (PSU again) as backup, in case SBI starts to act funny.
Will post the details of what I went through and other details here.

[MileCruncher]

We got a Bolero in May and it was bought in my wife's name. She has been banking with HDFC for the last 5/6 years and they had a 10 lakh pre-approved auto loan on her account. She was told that she could get upto 100% of the Ex-showroom price of the car but when we applied, was told that they will do only 80% and that too as a special case as it was Jeep being bought by a woman (Weirdest reason I have ever heard). During our purchase process one thing we realised that one should get the process done themselves wif they want the best rates esp with Pvt Banks. Getting a car financed through the PVT Bank dealers attached to showroom means paying slightly extra than the actual rate. Also one thing that I have noticed is that even if you approach PVT Banks directly, they don't take your case and would pass it on to their DSA's.

So we went to the nearest SBI branch, filled in the form, gave documents, were out in less than 15 minutes. One thing worth mentioning over here is that SBI has improved tremendously in the Customer Service department and almost 80% of their staff is very courteous to customers.

Even though our loan approval process took about 15 days, partly due to a residential verification problem, everything was done nice and clean with no hidden clauses.

Please note that SBI does maximum upto 85% of OTR cost minus any discounts whereas private banks will do only upto 80% of the Ex-Showroom Price of the vehicle(discounts don't matter), pre-approved loan or not. Also the hidden charges and other clauses make it a customer's nightmare.

Another good feature with SBI is that you can choose your EMI date

[predatorwheelz]

I've noticed a lot of facts as well as myths being discussed about banking on this thread. Let me add my 2 cents (benefits of being a banker) as well as support/criticize some of the facts and myths discussed here.

First of all, let me clarify how a auto loan is computed over its life period in a private bank/NBFC vis-a-vis a PSU bank.

In a private bank/NBFC, most auto loans are given out on a ballooning interest basis. This means that while your EMIs are the same over the lifetime, in the first 1-2 years the majority of your EMIs consist of interest, with a meagre portion consisting of principal. In the later years, the focus shifts towards majority principal repayment.

On the other hand, in a PSU bank, an auto loan is treated as a normal commercial loan. Principal repayment is equated over the lifetime, and interest is charged at a pre-agreed rate or the prevalent interest rate (depending on whether you've chosen fixed or floating) in each year.

Confused? Ok, lets suppose you've taken 2 loans of Rs 600 from SBI and HDFC for a period of 5 years eachfor 12pct pa. Your EMI is said to be Rs 11.20 per month.

While computing, SBI has first broken down your principal repayment into Rs 120 per year. Then it has charged interest at the prevalent interest rate (12pct). So your yearly repayment has come to Rs 134.4, or Rs 11.20 per month. At the end of first year, your principal outstanding is Rs 480, and interest outstanding is Rs 57.60

Conversely, HDFC is also charging you Rs 11.20 per month. But in the first year, although you've paid the same 134.40, you'll find out your principal outstanding is Rs 510 (approx), and the extra Rs 30 has been paid as interest.

Disclaimer: SBI & HDFC have been named only to illustrate the example of ballooning vs straight interest calculation. It has no relation to the specific repayment workings of said banks!

Now for the facts and myths:

Originally Posted by Axe77

If you are looking to prepay the loan sooner, it may be a good idea to get the break up of the EMI schedule up front from the shortlisted banks. That way, you can actually see at any point in the loan life cycle how much has been allocated towards principal and how much towards interest (regardless of the claimed interest rate being applied). While claimed interest rate is important, its equally important to check how much amount in each EMI is being allocated towards Principal.

Very advisable to get EMI schedule if you're availing the loan from private bank. It wont make much difference if you're availing loan from a PSU bank.

Originally Posted by Axe77

As for HDFC, I've decided to completely steer clear from the pvt banks after my last experience with HDFC. On my last car loan, I prepaid HDFC with about 6 EMIs left. I dont know what kind of computation HDFC applies but the amount they asked me to pay as prepayment was actually a little higher than the total amount I would have paid as 6 EMIs had the loan simply carried on normally. That's sounds like highway robbery to me.

The extra amount you've paid is due to 4pct Prepayment penalty that most private banks charge.

Originally Posted by MileCruncher

She was told that she could get upto 100% of the Ex-showroom price of the car but when we applied, was told that they will do only 80% and that too as a special case as it was Jeep being bought by a woman (Weirdest reason I have ever heard).

That 100pct pre-approved loan is a bunch of crap. In any case they will do a fresh credit analysis on you once you avail a fresh loan.

The only reason they call it "pre-approved" is because the customer is pre-approved, not the loan. She being an existing customer, the KYC (Know your customer) norms have been completed for her - as far as confirming her identity, address and income details (if applicable) are concerned.

Originally Posted by MileCruncher

During our purchase process one thing we realised that one should get the process done themselves wif they want the best rates esp with Pvt Banks. Getting a car financed through the PVT Bank dealers attached to showroom means paying slightly extra than the actual rate.

When you avail a loan from the bank person sitting at the dealer, the latter claims a small share of the pie called "Finance Payout". To compensate for this, the bank charges a small premium (say a 0.25pct higher interest rate or a Rs 4000 upfront sanction fee) from you. Easily waived off if you keep insisting.

Originally Posted by MileCruncher

Also one thing that I have noticed is that even if you approach PVT Banks directly, they don't take your case and would pass it on to their DSA's.

Please note that customer service executives in any private bank branch are trained only to handle regular (deposit/withdrawl) retail queries. Auto Loans is entirely a separate department. If you approach a branch of a private bank, they only pass on to the DSAs who in return get in touch with the actual auto loans people. Sad result of super-specialization!

Originally Posted by MileCruncher

Please note that SBI does maximum upto 85% of OTR cost minus any discounts whereas private banks will do only upto 80% of the Ex-Showroom Price of the vehicle(discounts don't matter), pre-approved loan or not. Also the hidden charges and other clauses make it a customer's nightmare.

Not correct. While it is true that only SBI extends finance on OTR while private banks finance only Ex-showroom, the rates you've mentioned are not concrete. I know someone who has availed 95pct on OTR from SBI, while I myself have availed 95pct of ex-showroom from Tata Finance for my car. And dont think there is any relaxation that bankers give to bankers!

Originally Posted by MileCruncher

Another good feature with SBI is that you can choose your EMI date

Yes, absolutely. SBI has a very flexible system where you choose which date you start your EMI, and adjust for any overdue interest upto that date.

[balajird]

Originally Posted by predatorwheelz

....While computing, SBI has first broken down your principal repayment into Rs 120 per year. Then it has charged interest at the prevalent interest rate (12pct). So your yearly repayment has come to Rs 134.4, or Rs 11.20 per month. At the end of first year, your principal outstanding is Rs 480, and interest outstanding is Rs 57.60

Conversely, HDFC is also charging you Rs 11.20 per month. But in the first year, although you've paid the same 134.40, you'll find out your principal outstanding is Rs 510 (approx), and the extra Rs 30 has been paid as interest......

Good information Predator, I wonder what would be difference one ends up paying for a 30L home loan with a private bank. Is the above calculation holds good for any loan?

[MileCruncher]

@predatorwheelz: Thanks for all the info.

Even though I was aware about the ballooning interest concept, didn't know that SBI didn't practice it

[ms001]

thats quite a helpful piece of information predator thanks

[wildon]

@predatorwheelz: Thanks for sharing the valuable info

[aZa]

Great info predatorwheelz!!!

I'm going with HDFC car loan. But after doing an extensive survey i found out

DENA bank is giving 8%
BOI 10%
BOB 10.5%

and so on... but it was typical govt office type affair with these banks. ICICI was charging 14.5% highest amongst all banks i checked.

Another thing, Websites like Apnaloan.com and a few more get you connected to the DSA directly.

Phew ! One heck of an exercise

[predatorwheelz]

Originally Posted by balajird

Good information Predator

Originally Posted by MileCruncher

@predatorwheelz: Thanks for all the info.

Originally Posted by ms001

thats quite a helpful piece of information predator thanks

Originally Posted by wildon

@predatorwheelz: Thanks for sharing the valuable info

Originally Posted by aZa

Great info predatorwheelz!!!

I'm going with HDFC car loan. But after doing an extensive survey i found out

DENA bank is giving 8%
BOI 10%
BOB 10.5%

and so on... but it was typical govt office type affair with these banks. ICICI was charging 14.5% highest amongst all banks i checked.

Another thing, Websites like Apnaloan.com and a few more get you connected to the DSA directly.

Phew ! One heck of an exercise

Great to know my information has been helpful to so many people. Just trying to clear off the cobwebs from a topic that is confusing to many.

Another piece of information I'd like to add. If you've made up your mind to go through a private bank/NBFC, avoid intermediaries (dealers/DSAs etc) as much as possible. The dealer has his finance pay out, the DSA has his commission. All these the bank will try to squeeze out from you in the form of one time fees/incremental interest rate. Try to find a contact in the bank who can get you directly in touch with someone in the Auto Loans department.

[balajird]

@Predator, it would be more helpful if you can explain whether the same ballooning interest (or whatever you name it , apologies, those are greek and latin for me) holds good for home loans as well.

[wildon]

Got a quote directly from Axis bank

Loan Details :

Rate of Interest they are saying @10.50%
No fees other than Rs.500 as Stamp Duty

They told me over phone that its fixed interest rate for the loan period. But they have not yet confirmed me these part through wriitten format .

[ArunV]

OT: Is ther any minimum amount for loan? like a certain percentage of car value.

One of my friend was trying to get a loan for 1 Lac and was denied saying that the amount was too less.

[shuvc]

What's this new scheme from SBI?

From whatever I gathered, it's 8% for the 1st year, 10% for year 2 & 3 and some % based on existing PLR from 4th year onwards.

For a 5 year loan,
Year 1 - 2016 per lakh
Year 2,3 - 2125 per lakh

For a 7 year loan,
Year 1 - 1559 per lakh
Year 2,3 - 1660 per lakh

# No processing charges
# No part-payment penalty, but loan can be closed only after 50% of tenor (or something like that)
# 85% of OTR financing + 85% of accessory financing subject to a max of 25K worth of accessories (or something like that)

(or something like that) = what I understood from a quick chat.

For SBI, does processing happen faster if one has an account with the bank?

[rjstyles69]

Folks what do you all think of State bank of Hyderabad , any experience dealing with them ? In my quest for my new vehicle I zeroed in on SBI for the finance part, however SBI has a lot of formalities and is time consuming.

I was given the same offer as SBI from SBH , SBH has informed me that they could process my loan in flat 4 days. I readily offered them a buffer of time of another 6 days. What do you chaps think, any experience dealing with SBH ?.

Also shuvc no use man, I hold a savings account with SBI and they have a gazillion procedures in place. I haven't ventured into the SBI car loan thingy, however from a colleagues experience dealing with SBI and the amount of patience required I am looking at SBH as an option.