Banks offer floating rate on auto loans

Amongst the auto loan segment floating rate is becoming choice of many people.

At the time of applying for a car loan, in the minds of most of the buyers a question arise whether they should choose fixed or a floating rate option.

The question is significant as the car loan have lower tenure in comparison to home loans. Usually home loans have 15-20 year tenures and the borrower has to go through a few rate cycles. If there is hike in the interest rates in the interim the equated monthly installments (EMIs) will also rise.

For example, currently most of the banks home loan floating rates is over 11.5 per cent. Earlier, three to four years ago, floating rates were as low as 7 per cent. As a matter of fact, over a long time the on the whole the impact on the finances would be more or less be balanced.

While car loans are normally for three to four years (Maximum tenure: 7 years). That means a person mostly will find it difficult to determine that whether they are entering a rising or a falling cycle.

Seeing a down fall in the demand of auto loan, in the past one year, many public sector banks, including State Bank of India, Bank of India and Bank of Baroda are offering floating rates on auto loans. Event the private sector lenders have started offering floating rate loans. ICICI Bank, previously in September 2007 was offering both floating and fixed options, will now be offering only floating rate loans from August 25.

N R Narayan, head of vehicle loans, ICICI Bank, said, “Earlier, we were planning to increase over fixed and floating rates by 50 basis points each. However, now we feel that the interest rate cycle has almost peaked. For the customer, it will make a lot of sense to get into floating rate auto loans.” Bankers are expecting another hike in interest rates in the coming six months, he said the interest rates will move southwards after that. So, check properly the interest rates offered at icici car loan to make a good deal.

Govind Pathak, director, Acorn Wealth, a financial planning firm also agrees with this. He said, “Six months ago, the answer would have been definitely fixed because of the uncertainty in the interest rate scenario. Now, floating rate looks like a better option”. Certainly, for the borrowers who want to take the loan for the short-term like six months or one year, fixed is still the best option. While for a three-year plus tenure, floating is the best option.

In fact this is the immediate solution as far as choosing the interest rate is concerned, auto buyers in the future will have to carefully determine the scenario before taking selecting the rate. Banks like Punjab National Bank, Allahabad Bank, Oriental Bank of Commerce are offering only fixed rates.

ICICI discontinues 2-wheeler loans at dealer’s end

ICICI Bank, the country’s largest two-wheeler financier, is discontinuing such loans offered at the dealer’s end from August 15.

This model accounts for the bulk of the two-wheeler business for ICICI Bank. The bank has already transferred 200 employees in this unit to other departments. ICICI Bank executive director V Vaidyanathan said:

“The bank has decided to re-orient the two-wheeler business through branches rather than at dealerships.” ICICI Bank has a network of around 1,400 branches. Also you may compare all ICICI Car Loan Rates here without getting confuse between the banks.t

The two-wheeler business in India has been facing a major upheaval, with many financiers exiting the market due to rising defaults and collection issues.