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-   -   The Cheap Loan or the Smart Loan - SBI Advantage Car Loan (https://www.team-bhp.com/forum/indian-car-loans-insurance/106710-cheap-loan-smart-loan-sbi-advantage-car-loan-8.html)

Hi,
I intend to go for a car loan and after reading this thread, it seems that it is SBI which makes most sense even though other banks might promise lower rates.

The question I have is:

Is it better to go to the bank directly at their St Marks Road branch or get the loan processed through an agent/DSA?
I m ok with a few hassles/running around/paperwork here and there but need the lowest possible interest rate. I intend to go for a 7 year loan.

Hi Devdath,
I got my loan from SBI done through VW downtown(where I have booked my car). I dont think they can charge more interest rate. Though keep a lookout for the processing fees. Most of the information can be got on SBI's website. Currently their interest rate is 10.75% on New car loans, i.e, 1699Rs/Lac for a 7 year loan. Hope this helps.

In most cases, the agents are not aware of the schemes that the bank is running - and if you try to pester them or push them, it does not work. The agents will always push you to the scheme that is most routine for them and the one that gives them the maximum benefit.

So it would be best that you go to the bank directly - the agent will not be prepared to do the running around and will not want to face the hassles with the extra work as well!

Keyur thanks for detailed explanation . I see that you have been very patiently answering all sorts of questions in the thread.
It would be great if could address some of my simple doubts pertaining to this scheme. Sorry I am a total disaster when comes to banking .

Please let me know if I've got this right.

Suppose I take loan for 500000 for 5 years, and my EMI comes close to 11000 p.m. On day one I deposit 500000 to OD account. So that makes my interest rate 0%.

This means from now on my entire EMI of 11k for the rest of the tenure is contributed to the Principal reduction.
Now If I leave my OD account as it is, ie. no withdrawals or deposits,the my outstanding principal should ideally be 0 in about 46 months (46*11k=~500000) instead of the usual 60 months.

And as I close my loan account I’ll also be able to withdraw my entire 500k from the OD account.

Once you deposit 5L to the account, there is no more outstanding principal, hence no interest.

After this, any amount you add in is EXTRA. So, the 11k that goes in as the EMI will just keep getting added to the current balance of 5L.
So after 1 EMI, it will be 511000, after 2 EMIs it will be 522000 and so on.

This extra amount will earn you NO interest, so there is no point in keeping it there at all. The OD account is withdrawable - this means that you can transfer the 11k on the very next day back to some other account (no point in collecting money there).

The day you close the account, the 5L that you had deposited on day 1 (or the appropriate remaining principal component as per the amortization schedule) will be deducted!

So, the best way is to have another normal savings account in SBI. Make sure that the EMI is paid by ECS from this account itself. Keep it funded to about 20-30K. Then ensure that you get internet banking transaction rights on both these accounts and setup a monthly auto transfer schedule that will transfer the 11K from the Loan OD account back to this savings account on the very next day the EMI is deducted.

So, if your EMI of 11K gets cut on the 10th of every month, on the 11th, you will get the money back in the account.

Get it??

Thanks a lot for the clarification Keyur. Sounds great. One more doubt regarding the closure of the account. This happens only at the end of the tenure, right?

Not necessarily. You can opt to foreclose it. You need to ensure that the required amount for closure is there in the account and you can give a letter to the bank asking for the closure.
But foreclosing beats the purpose of this type of account!

Thanks Keyur. :)

An update. I just talked to the manager here at the local branch. He has confirmed about this scheme and also says that the loan amount could be less than 5 lakhs.

You are welcome.

Also, the 5lakh limit was there when I had written the post. It was subsequently removed (should be in some intermediate post).
Even the name is no longer Advantage Car loan specifically for this :)

@Keyur

This is great information. However I see that the thread is quite old. And would like to know if such a scheme still exists? As indicated earlier, you are enjoying the benefits of this scheme, Hence would you be able to share some contact from SBI Pune who can be of help ? Thanks in Advance my friend !! :)

Hi Keyur,
I'm going to buy a car soon so just wanted to ask you a question regarding the Advantage Car loan in case of a sale. Would i be correct in assuming the car is hypothecated to the bank in the same way it would be if it was an ordinary car loan? So assuming I want to sell the car next year for 26L (Loan amount 22 L pending) , can I close the loan using the buyer's funds and not mine?

Its now called SBI Car Loan Scheme (OD).

This is valid and going by this thread, its getting popular. I myself got one in July 2012.

Yes the HP works the same as in a regular car loan.

Though the thread is old, I still keep updating it with newer details as they come. The scheme still exists (and will keep going on for quite some time).
You may contact Mr. Bhave at SBI Pimpri (near Kalasagar ) and he will help you out - or you may PM me!

Hypothecation remains same as other loans. If you want to sell the car next year, you can either take funds from the buyer in advance and close it or with your own funds - but the same needs to be done BEFORE the HP can be removed.

SBI has further reduced their interest on car loans to 10.5%, which I believe is the lowest amongst all the banks.

so the effective rate works out to be 10.50+0.75=11.25. also you dont have to give an advance emi and you can repay the loan at anytime in smaller amounts also. but the rates is floating and is pegged to the base rate hence in case int rates go up your interest outflow could rise.