I would like to take a Car loan of 4,00,000/-. It is known that certain banks, like SBI, has now new method of calculating lending rate as per RBI norms which is known as MCLR.
My questions are :
1. Is it there for Car Loans?
2. There are Car Dealers who lend us on flat rate as compared to floating rates of nationalised banks, so which one is better considering the new MCLR computing of Interest Rate by Nationalised banks?
3. In the loan granted by dealers, there is one offer as, if we put a lumpsum money into loan after 2 years, the whome amount will be used for reducing the principal amount. Nationalised bank, normally puts in the amount to both Principal portion and Interest portion as far as i know. So, which one is more benficial?
4. Last but not the least, whether in the coming 5- 7 years, what is the possibility of Interest rate MCLR - going up or down?
21 September 2016
01. MCLR is applicable for FLOATING rates. Normally personal loans, car loans are having fixed rate 02. EMI is the best indicator to judge which loan is economical...SBI or any other. Dont try to go into the jargon of flat rate, floating rate etc. 03. Interest is always calculated on principal. The new balance of principal = opening balance+interest - repayment. The next interest application is done on this new balance.... So? Where there is no any pre payment penalty, it should be better 04. Future is always uncertain.....but others things being constant, the rates should go down over a period of 5 to 7 years
21 September 2016
Thank you Mr. Amol. Regarding 1st doubt, it arised as SBI is making MCLR applicable to even car loans. And one more thing sir, what is your knowledge about how nationalised banks deals with pre payments? Thank you once again for your valuable reply.
21 September 2016
The banks are free to use MCLR for all floating rates. SBI has always been pioneer in many respect so far as banking is concerned. Most of the nationalised banks do charge pre payment charges of around 2 to 5 % of the initial loan amount taken. Be concerned about the same while signing the agreement.
21 September 2016
Other things being more or less same, I will consider non financial factors for making the decision, rather than type of rate of interest being fixed or floating : 01. ease of paying the monthly installments 02. documents required for sanction of loan 03. Loan processing time 04. What is the procedure for accident claim 05. How fast the HP charge is removed once the loan is fully repaid 06. What is proactive time, if I want to upgrade the car to new version or new make of car. etc
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