Retail borrowers have never had it so good in the recent years. Home loan rates are at a 15-year-low, starting at 6.75 percent and car loan rates start at around 7.1 percent, as per data from Bankbazaar.com. Moreover, the processes seem simpler and faster than ever, with most lenders having boosted their digital infrastructure to tackle COVID-19-induced aversion to physical processes.
Home loan disbursals have picked up pace on the back of lower home loan interest rates, festive offers from developers and, more importantly, reduction in stamp duties and other charges. It is indeed the best time to buy a home, but what about the other prized asset of most middle-class Indians – a car? Factors similar to the ones responsible for rise in demand for home loans have led to a spike in car sales in December 2020 too.
A depreciating asset
However, since a car is a depreciating asset and earns you no tax benefit – neither on principal repayment nor interest payment – you need to evaluate your decision carefully before going ahead. Lower interest rates and offers do not mean that you should go ahead with the purchase, no matter how lucrative they sound. Buy one only if you can easily afford it – your total EMIs should not exceed 45 percent of your take-home salary.
Interest rates on car loans for all listed (BSE) public and private banks considered for data compilation. Banks for which data is not available on their websites have not been considered. Data collected from respective banks’ websites as on January 14, 2021. Banks are listed in ascending order on the basis of interest rate, that is, bank offering lowest interest rates on car loan of Rs 10 lakh is placed at top and highest at the bottom. Lowest interest rates offered by the banks on loan of Rs 10 lakh is shown in the table. EMI is calculated on the basis of interest rate mentioned in the table for Rs 10-lakh loan with a tenure of seven years (processing and other charges assumed to be zero for EMI calculation). Interest rate mentioned in the table is indicative and it may vary depending on banks’ terms and conditions Minimum interest as per APR in quarter-ended in September 30, 2020 taken into account.
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