[musicmanaman]

Originally Posted by no_sweat

Just a thought experiment with hypothetical figures:
suppose you have the margin of about 10K per month.
if you go for 3 yrs loan, EMI: 10k
if you go for 7 yrs loan, EMI: 6K
Difference: 4K - If you put this in a regular SIP (ELSS perhaps)
then the returns after 7 years - your interest is covered - maybe even the cost of the car if markets are booming.

Kindly note that as this is the SIP, you get the benifit of dollar cost averaging.

This is one of the best ideas I have come across, a little more investigation and number crunching is required, I think yes, the interest part will most certainly be covered by the profits the SIP generates over time, and 7 years is quite a lot of time to average cost, and have a healthy return.

I would just like to add there that now Mutual Funds are not the only option anymore for SIP, even Equity can be bought through SIP's, just try ICICI Direct, I have just bought a few shares to try this feature out and it does work, but yes, the lesson learnt is don't invest very small amounts, as the brokeage's will be high, for example you are better off investing Rs 10000/- a month on a monthly SIP than a Rs 2500/- weekly SIP for the same equity.

[shankar.balan]

i dont think you can get a 7 year loan for a big SUV type thing.
mostly the 7 year tenure is given for cars - sedans, saloons and whatnot.
additionally, while one may be able to secure a loan of upto 85-90% for buying a car, most banks have a cap of 75-80% when you want to go and buy an SUV.
My suggestion is never to bite off more than you can chew.
Better to put down a higher downpayment and take less of a loan.
Also, when buying a car on instalments it is easy to get carried away and go for a super luxe vehicle thinking its cool and so on. But take a moment to consider the likely costs of maintenance, spares, running and servicing as well, before you jump!

Originally Posted by sunishsamuel

Private banks do not have this scheme, but with an interest rate of 7-10% from SBI (as per an ad) a 7 year loan would be economical to me if i think of for Eg: a new pajero or a fortuner. Did anyone buy such a car with a 7 year term ?

Nt sure how true, but saw an ad that said BMW cars are available at a finance of .99%

My efforts to reach the customer support is in vain. But if that's true, and if i get the loan for 7 years then i can afford a loan of Rs. 30Lakhs @ EMI of Rs. Rs. 36950/-per month. That means i can afford 5 series soon

But i am not sure if the high paying IT jobs would last that long

[MileCruncher]

Originally Posted by shankar.balan

i dont think you can get a 7 year loan for a big SUV type thing.
mostly the 7 year tenure is given for cars - sedans, saloons and whatnot.
additionally, while one may be able to secure a loan of upto 85-90% for buying a car, most banks have a cap of 75-80% when you want to go and buy an SUV.

No not true.

SBI gives 7 year loans for all vehicles. And 85% of the on road amount.
Whereas Private Banks do at the most 80-85% cost of the ex-showroom price.

[shankar.balan]

SBI and possibly other Nationalized banks could be doing this to tout for new business.
Indeed even Axis Bank's credit policies seem to have become a little relaxed.
Thanks for the info milecruncher!

Originally Posted by MileCruncher

No not true.

SBI gives 7 year loans for all vehicles. And 85% of the on road amount.
Whereas Private Banks do at the most 80-85% cost of the ex-showroom price.

[bandlimitedlife]

SBI and possibly other Nationalized banks could be doing this to tout for new business.
Indeed even Axis Bank's credit policies seem to have become a little relaxed.
Thanks for the info milecruncher!

I try to stay away from SBI when it comes to auto loan. Since they pull down the interest rate the first year they will have some caveats with their repayment schedule. They will not allow u to repay partially as and when you have money till maybe half your loan term is complete (my friend is suffering due to this).

I had a loan with Syndicate Bank and i closed it off. Now for my new car just last week I took another loan from Syndicate Bank itself, they were ready to give me 95% of the on road price and repayment schedule of 84 months.

They will allow you to make partial payments from Day 1.

My emi is around 8K but I have given standing instruction for 25K, they happily took it. This implies my outstanding principal will reduce by an additional 17k per month and so will the interest proportionally. I will be able to probably close the loan in less than 18 months with minimal interest payments.

My point is if you get a bank which will take partial payments regularly it is better to take it then look out for the extra 1% interest savings, because on the whole one would be saving lot more.

[MileCruncher]

Originally Posted by bandlimitedlife

I try to stay away from SBI when it comes to auto loan. Since they pull down the interest rate the first year they will have some caveats with their repayment schedule. They will not allow u to repay partially as and when you have money till maybe half your loan term is complete (my friend is suffering due to this).

I had a SBI 7 year loan and I closed off the loan in less than 2 years and applied for afresh one. Actually applied for 2 car loans together. There wasn't any pre-closure charges as well.

I would suggest your friend to speak to the Bank Manager.

[shankar.balan]

Its sad that banks like ICICI and HDFC etc never allow partial bulk payments on a car loan. they go strictly by the book and one has to either close the loan completely or work through its natural term.

Partial pre-payment makes a lot of sense - it enables one to get the load off one's head and cuts down the liability on the usurious interest as well.

Originally Posted by bandlimitedlife

They will not allow u to repay partially as and when you have money till maybe half your loan term is complete (my friend is suffering due to this).

I had a loan with Syndicate Bank and i closed it off. Now for my new car just last week I took another loan from Syndicate Bank itself, they were ready to give me 95% of the on road price and repayment schedule of 84 months.

They will allow you to make partial payments from Day 1.

My emi is around 8K but I have given standing instruction for 25K, they happily took it. This implies my outstanding principal will reduce by an additional 17k per month and so will the interest proportionally. I will be able to probably close the loan in less than 18 months with minimal interest payments.

My point is if you get a bank which will take partial payments regularly it is better to take it then look out for the extra 1% interest savings, because on the whole one would be saving lot more.

[bandlimitedlife]

I had a SBI 7 year loan and I closed off the loan in less than 2 years and applied for afresh one. Actually applied for 2 car loans together. There wasn't any pre-closure charges as well.

I would suggest your friend to speak to the Bank Manager.

Did you take the loan when they had that offer of 8% for the first year and then some 1% greater the next year or so? I think the people affected were the ones who got attracted by this scheme.

Two of my friends took from SBI from different branches and both have been told that they cannot prepay for some set amount of time.

If they give you in writing on the sanction letter that no preclosure / prepayment charges it is good enough to go ahead.

Its sad that banks like ICICI and HDFC etc never allow partial bulk payments on a car loan. they go strictly by the book and one has to either close the loan completely or work through its natural term.

Partial pre-payment makes a lot of sense - it enables one to get the load off one's head and cuts down the liability on the usurious interest as well

True and the whole point is it is only people like me who cannot arrange the entire amount in one go who will go for a loan (Since there is not income tax benefit on the Auto Loan)

The pvt banks play this trick of sanctioning the loan fast and luring customers to buy into their loan. Finally one will feel like this :

Last week it took me less than 7 hours to get my DD from Syndicate Bank from the time I made the application. I am sure even pvt banks will take longer than this.


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Its sad that banks like ICICI and HDFC etc never allow partial bulk payments on a car loan. they go strictly by the book and one has to either close the loan completely or work through its natural term.

Partial pre-payment makes a lot of sense - it enables one to get the load off one's head and cuts down the liability on the usurious interest as well

True and the whole point is it is only people like me who cannot arrange the entire amount in one go who will go for a loan (Since there is not income tax benefit on the Auto Loan)

The pvt banks play this trick of sanctioning the loan fast and luring customers to buy into their loan. Finally one will feel like this :

Last week it took me less than 7 hours to get my DD from Syndicate Bank from the time I made the application. I am sure even pvt banks will take longer than this.

[MileCruncher]

Originally Posted by bandlimitedlife

Did you take the loan when they had that offer of 8% for the first year and then some 1% greater the next year or so? I think the people affected were the ones who got attracted by this scheme.

Two of my friends took from SBI from different branches and both have been told that they cannot prepay for some set amount of time.

If they give you in writing on the sanction letter that no preclosure / prepayment charges it is good enough to go ahead.

I took the loan in April 2009 under the promotion scheme of 10% first year and .25% over SBAR. Still no issues while closing. You just need to create a rapport with your branch.

[bandlimitedlife]

@MileCruncher: Excellent !!! I shall inform my friends who are with SBI about the same, since these guys have also taken loan from SBI around the same time as you did.

Thanks !!!