At the time when banks and other lending institutions are planning for interest rate hike, State Bank of India (SBI) has extended its teaser rate offer on its car loans up to June 30. SBI Ezee Car Loan Scheme offers, car loans at 8% per annum for the first year and 10% for the second and third years. EMI (Equated Monthly Instalment) 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 lakh. Interest rate reset will be implemented from the fourth year.

Thus SBI Ezee Car Loan scheme has come as a boon for borrowers planning for a car loan. At present banks and other lending institutions are offering car loan anywhere between 9.5-14% depending upon the tenure of the loan. The fixed rate of interest is in the range of 10.5-15%.

As for the features of the loan,

• The maximum loan amount available for used car will be Rs 15 lakh. There is no such limit for a new car.
• Ezee Car Loan Scheme, there is a cap on the loan amount at 2.5 times of the net annual income. One can enhance the loan amount by clubbing the spouse’s income.
• Minimum down payment of 15% of the on-the-road price of the vehicle is mandatory and interest is calculated on the daily outstanding balance.
• The interest cost to a borrower is lower than that compared with monthly outstanding balance or a flat rate charged. The processing fee is 0.5% of loan amount.

The loan is offered for a maximum tenure of 7 years for salaried and 5 years in case of self employed. However, the bank offers another variant in car loans called ‘Advantage Loan’ which offers 7-year repayment period to self-employed individuals as well.
SBI’s Ezee car loan scheme is apt for borrowers planning to take the loan for tenure of 3-5 years. The bank offers loans for 3 years under this scheme. However, if one is planning to stretch the loan for a longer tenure, bank may slap a penalty of 2% of the repaid amount subject to certain conditions. Hence one should evaluate his repayment capacity and stick to the schedule.

With the new regulation implemented by RBI starting July 1 banks interest rates on loans disbursed will be set according to their ‘base rate’ instead of the benchmark prime lending rate (BPLR), which, has been the case till now. Thus with the new barometer for pricing the loans, this could impact the loan offer from the fourth year.