SBI offers teaser rates on car loan

All the banks are preparing to move to base rate system from July 1 which is likely to increase interest rates. At this time State Bank of India (SBI) has extended its teaser rate offer to its car loans. Bank has announced to offer 8% on its car loans up to June 30.

Under the Ezee Car Loan Scheme bank is offering car loans at 8% per annum for the first year and 10% for the second and third years. The EMI (equated monthly installment) on a car loan will be as low as Rs 1,559 in the first year and Rs 1,647 in the second and third years for every Rs 1 lakh.

From the fourth year the interest rate will be reset at the card rate (rack rates which doesn’t include dealer discounts or other subventions) contracted on the date of sanction, depending on the tenure of the loan.

Currently banks are offering floating rates which is around 9.5-14% depending upon the tenure of the loan. While fixed rates are set in the range of 10.5-15%.

According to experts the Ezee loan scheme is best for the borrowers who can pay off the loan in 3-5 years. The loan is offered for 3 years in this scheme. If you loan with a longer repayment tenure then bank might slap a penalty of 2% of the repaid amount subject to certain conditions. Thus before selecting the scheme you should evaluate your repayment capacity and stick to the schedule.

Meanwhile all banks are still busy in calculating the new barometer for pricing their loans. This can affect the loan offer from the fourth year amid uncertainty as it will depend on what the banks would fix as the benchmark rate, below which they will not be able to lend, unlike under the current dispensation.

According to experts if you can pay off the loan in first 3-5 years then it would make sense to take loan now as the interest rate will be low during the initial years.

However the clear picture on base rates will be visible only in July, so if you take car loan now the contracts from the fourth year will be signed under the shadow of uncertainty.