Car loans observe a hike in interest rates

Indian auto mobile market is the second fastest growing auto market globally. The growing auto industry sales also helped various other supporting industries such as ancillary, finance and others. With the growing sales numbers the major loan providers are also increasing the interest rates. Effective February 3, 2011 Kotak Mahindra and HDFC have also raised the interest rates. It is expected that the interest rate will reach to 13 per cent.

Ashok Khanna, Senior Executive Vice-President, HDFC Bank said that the company has decided to raise the interest by 50 bsp due to the recent hike by RBI. At present the rack rate ranges between 11.5 per cent to 13.5 per cent depending on the auto mobile model and its loan tenure.

Sumit Bali, CEO, Kotak Mahindra Prime revealed that the bank will increase interest rates by 50 bsp. The hike has helped in narrowing the gap between the transmission of borowing cost increment on the lending side to 25 bsp.

A hike of 50 bsp is for the common loan period of 36 months ,which will result in the increment of only Rs 25 in every lakh or Rs 1200 every year on hatch back which cost Rs 4 lakh, however, it will be Rs 1800 for a sedan. The EMI is more on the loans for the hatchback such as Hyundai i10 in which the interest rates is almost equivalent to the luxury car such as Mercedes C Class. However the most reasonable range is available for Rs 20 lac or more. The interest rates differ on the time duration and car model type. Like the 36 to 60 months time period carries the most inexpensive interest rates.