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Floating rate car loan (SBI-11.25, zero prepay) v/s Fixed rate car loan (HDFC - 11.5)

Discussion in 'Insurance & Loan Reviews' started by speedJet, Oct 7, 2011.

  1. speedJet

    speedJet Superiore

    Messages:
    856
    Gurgaon
    All

    I need suggestions on what is the better option among the following loans:

    1. SBI car loan features:
    a) 11.25% floating rate of interest on daily reducing
    b) zero pre-payment charges
    c) first EMI is not pre-paid
    d) SBI claims that even if I make partial pre-payment, it shall be deducted from the principal and subsequently the tenure of the laon shall reduce. Is it true
    that partial pre-payment does not include interest payment?
    e) zero processing charges

    2. HDFC car loan features:
    a) 11.5% fixed rate of interest on monthly reducing
    b) around 5% pre-payment charges for first 2 years and around 3% after that
    c) first EMI is pre-paid
    d) Rs 1800 processing charges

    Some other information
    - loan amount shall be around 3 to 4 lacs
    - duration shall be 3 years
    - HDFC loan is approved
    - SBI says that loan shall get approved by next mid-week

    I am inclined towards SBI but the floating rate puts a doubt in my mind that I shall suffer if the rates are hiked. All valuable inputs from forum members are needed
  2. If you keep pending with HDFC guys, they will reduced interest rate by 8.5% , wait this this month end, in last week they try to get archive the targets.

    SBI any time better than any other. or you can check with BOB too.
  3. shams

    shams Esperto

    Messages:
    2,388
    Bangalore
    if you have any intentions of prepaying the loan then in any case(if interest rates increase) SBI would be cheaper for you.
  4. Srini

    Srini Regolare

    Messages:
    468
    Chennai
    In the current market scenario floating could always be riskier. Note that for small loans like this the difference is always negligible. ie., the difference would be Rs.20 per lakh per month for each 0.25% difference. If your interest rates go up by 1% for the next 1 year you would have paid Rs.4800 higher as interest.

    Do some calculations and then decide.
  5. speedJet

    speedJet Superiore

    Messages:
    856
    Gurgaon
    Thanks guys for your inputs. To summarize:
    1) SBI floating rate is better if pre-payment is a priority
    2) Fixed rate from private could be better if the rates increase further

    For me, pre-payment is a priority and hence I think that SBI is the better option. Also, HDFC guys seem to lack transparency.

    ---------- Post added October 9, 2011 at 01:00 AM ---------- Previous post was October 8, 2011 at 05:39 PM ----------

    Is anyone aware if providing ECS to bank for loan payment mandatory or optional. Given a choice I would like to stay away from ECS
  6. dj.nish

    dj.nish Superiore

    Messages:
    543
    Mumbai
    Rack rates are as high as 13.5%. How do you expect the bank to bend as low as 8.5%? The base lending rate is 10% boss!

    Amarjeet - you could read my experience here http://www.teamfiat.co.in/forum/showthread.php?3329-Which-car-loan-to-go-for and get all your answers in one go.

    SBI is better as interest rates are already peaked out and there are little chances of them increasing further. Also, their band is restricted to +/- 0.5%. If you know you will be pre-paying (and that too, small amounts at regular intervals), go for SBI. You are not being charged any penalty, so you might as well pre-pay even 10-15k every few months. That essentially takes care of any possible interest rate hike.

    HDFC/Axis are better if you will never prepay. They may try to hard sell the loan by offering waivers but unless things are written down in the agreement, do not believe them.

    And as I said in my thread, ECS is not a mandatory requirement. In fact, I was the one who asked for ECS from SBI. They were going ahead with 60 cheques to begin with.
  7. kindmok

    kindmok

    Messages:
    1
    I think you should go for HDFC loan, Because there interest rate is also less than SBI. Interest rate is a main factor for getting any type of loan. As you said that Your HDFC loan is already approved.. So just go for it as soon as possible.

    equipment loan | car finance Australia
    Last edited: Apr 3, 2012
  8. Relativity

    Relativity Superiore

    Messages:
    853
    Chennai
    I took from SBI as pre-payment is a priority for me.
    2 people like this.
  9. speedJet

    speedJet Superiore

    Messages:
    856
    Gurgaon
    I believe SBI is a better option as private always have hidden terms that are not good for the customer
  10. dj.nish

    dj.nish Superiore

    Messages:
    543
    Mumbai
    I'm sorry but am I the only one who does not see the logic of having Australian finance company's link here?
    Last edited: Apr 4, 2012

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