BOB auto loan interest rate: With the holiday season there is a plethora of deals and offers to choose from. And, when it comes to buying a car this season, discounts and freebies come with your new vehicle. If you are considering a financing option, most banks waive processing fees or charge a nominal fee on auto loans. Here we take a look at the Bank of Baroda (BOB) auto loan program and its features, interest rate, processing fees, and EMI calculation.
As of October 1, all personal loans, including auto loans, granted by banks must be linked to an external benchmark such as the RBI repo rate. BOB also linked its lending rate to the repo rate called Baroda Repo Linked Lending Rate (BRLLR).
The current RBI pension rate is 5.15 percent and the BOB profit margin (varies by bank) is 2.95 percent, so BRLLR is 8.10 percent. The actual loan may not take place at BRLLR because the bank may add a Strategic Premium (SP) of 0.25% and then add a margin, which will depend on the borrower’s credit profile or credit rating.
BOB auto loan interest rate
According to the bank’s website, the interest rate for the BOB car loan is therefore between BRLLR + SP + 0.25% to BRLLR + SP + 2.00%, which will effectively be 8.6% at 10, 35%, depending on the borrower’s credit score.
Additionally, existing home loan borrowers with a good credit history are eligible for a 0.25% reduction on the interest rate on their car loan.
On a loan of Rs 7.2 lakh for 5 years at 8.6%, the EMI amounts to around Rs 14,807, while over the 7-year term, it is Rs 11,439. To calculate the EMI auto loans, you can use the auto loan IME calculator on bank websites.
Auto loan and credit rating
Many banks have started offering a better interest rate to borrowers who have a decent credit rating by the bank’s standard. In the case of BOB, the borrower’s credit score or CIBIL office score is reviewed. The minimum credit score required for the BOB auto loan is 725.
According to the BOB website, for a car loan there will be a unified processing fee of Rs 500 plus applicable GST until December 31st. Otherwise, the processing fee was 0.5% of the loan amount, with a minimum and maximum capped at Rs. 2,500 and Rs 10,000 per loan sanctioned. There are no pre-closing costs and the loan can be repaid in full with no prepayment charge.
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The minimum age of the borrower must be 21 years old, while the maximum age cannot exceed 70 years after the end of the repayment period. The repayment period or seniority of car loans is 84 months at most.
Amount of the loan
Banks can either provide a loan amount equal to the car’s ex-showroom price or the road price. The price on the road will be higher because it will include other costs borne by the owner such as the cost of accessories, registration, road tax, insurance, etc. BOB finances up to 90 percent of the road price of the car, while the remaining 10 percent is the margin money the borrower has to pay. For example, if the road price is Rs 8 lakh, the loan amount will be Rs 7.2 lakh and the borrower will have to pay Rs 80,000.
Eligibility based on repayment capacity
The maximum loan amount that the bank can sanction will depend on your repayment capacity. The bank will add the (proposed) auto loan IME to your existing IME and then penalize the auto loan amount based on your gross monthly income (RMG). For example, for a person with an RMG of 50,000 rupees and above but less than 1.5 lakh rupees, the total deductions, including the proposed EMI, should not exceed 70% of the RMG. Here is the eligibility based on repayment capacity:
The total deductions, including the proposed EMI, must not exceed (for employees)
- RMG less than Rs.50000 – 60%
- Rs.50,000 GMI and above but less than Rs.150,000 – 70%
- GMI Rs. 150,000 and above – 80%
The total deductions, including the proposed EMI, must not exceed (For others)
- Average annual income (last 2 years) less than Rs. 6 lakh – 60%
- Average annual income (last 2 years) is Rs. 6.00 lakh and above – 80%
What to do
The car loan is not an implied debt because the value of the car depreciates over time. Try to get funds from your own sources and keep the loan amount to a minimum to reduce interest charges. Plus, prepay the loan when you have excess funds. When choosing the mandate, opt for a shorter mandate even if the EMI will be higher than for mandates with a longer repayment period. The interest cost will be higher if you choose a longer loan term.