SBI Advantage Car Loan with Overdraft Facility


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As surfing through TAI, I see many people wants to buy a car and most of them go for car loan. A question arises is which bank will provide me better service and at lower rates. So here is an attempt to explain the advantages of SBI car loan with Over Draft facility over nor mal car loan.

Whenever a person decides to buy a vehicle, everyone have 2 options.

  1. Pay full vehicle amount by cash/cheque and vehicle is yours.
  2. Pay down payment and take loan from some bank and then pay EMI every month.

Now what if you want benefits of both the options. How? [confused]

If you decide pay full amount by cash/cheque, you pay Rs.7,50,000. This will make your pocket lighter by Rs.7,50,000 in one go. :-)

Here comes the SBI Advantage car loan with over draft facility. Consider a example you buy PUNTO worth Rs. 7,50,000. You pay Rs.2,50,000 as down payment and go for loan for Rs.5,00,000 for 7 years. For interest rate 11.00% you will pay EMI of Rs.8483 monthly.
Now from some where you won lottery of Rs.5,00,000 and you decided to pay back your loan amount. You simply go to bank and pay rest of remaining loan and done. Car loan is over, but you left with nothing of the money won. Sad isn't it!!! Plus penalty of pre payment if there is any.

Now here is the catch. Instead of normal car loan you go for SBI car loan with over draft facility.
The interest rate for overdraft loan would be 0.25% more. so the interest rate here would be 11.25%.
Monthly EMI would be Rs.8547, But what we will get by paying more?
In this case, If you have access money, you can do pre payment of the loan, but the pre paid loan principal amount you can withdraw and use as if it was a normal account.

Example: Suppose loan is for Rs.5,00,000, You take loan using SBI Over draft facility. After few months you pre pay 4,00,000. So what you pay now is interest only for Rs. 1,00,000. But Rs.4,00,000 you pre paid can be withdrawn and use if required. So here you maintain your liquidity plus you pay less EMI. So instead of keeping money in your savings account, you can keep money in your over draft account, withdraw as per your will and use it.

Hope this helps. If you require more information, do let me know.

This type of loan is only useful if you have some money left after paying down payment.
 
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Thanx dharmesh fantastic write up I have question here now .
Like you said I took a loan of 5 lakhs and then say put 3 lakhs there so iam paying interest+ installment on 2 lakhs ? And what if I remove 50,000 how the story unfolds from here ?
 
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That's pretty nice and helpful information and will help a lot of prospect buyers.

So do you still have to pay a penalty in this plan of you prepay your loan amount.
 
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Thanks Dharmesh this was a very useful information, is it only with SBI or any other nationalised bank running similar offer's?
 
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Hi Dharmesh, great piece of info. This is very similar to SBI Maxgain Home loan scheme. Whatever money you keep in the OD account will be deducted from the principal outstanding when calculating interest component.
The EMI amount still remains the same; however since the interest component in the EMI is reduced, there is a greater reduction in the principal component resulting in overall reduction in the loan period.
Its a excellent scheme and unlike the auto loan, in the HL scheme there is no additional 0.25% interest.
 
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Hi Dharmesh, great piece of info. This is very similar to SBI Maxgain Home loan scheme. Whatever money you keep in the OD account will be deducted from the principal outstanding when calculating interest component.
The EMI amount still remains the same; however since the interest component in the EMI is reduced, there is a greater reduction in the principal component resulting in overall reduction in the loan period.
Its a excellent scheme and unlike the auto loan, in the HL scheme there is no additional 0.25% interest.
What is additional 0.25% interest ?
 
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Thanx dharmesh fantastic write up I have question here now .
Like you said I took a loan of 5 lakhs and then say put 3 lakhs there so iam paying interest+ installment on 2 lakhs ? And what if I remove 50,000 how the story unfolds from here ?
Then from the day you remove Rs.50,000, your interest and EMI and would be calculated as Rs, 2,50,000.

That's pretty nice and helpful information and will help a lot of prospect buyers.

So do you still have to pay a penalty in this plan of you prepay your loan amount.
No penalty for pre pay in SBI. That's what loan officer informed me.

Thanks Dharmesh this was a very useful information, is it only with SBI or any other nationalised bank running similar offer's?
This is only available with SBI.

Hi Dharmesh, great piece of info. This is very similar to SBI Maxgain Home loan scheme. Whatever money you keep in the OD account will be deducted from the principal outstanding when calculating interest component.
The EMI amount still remains the same; however since the interest component in the EMI is reduced, there is a greater reduction in the principal component resulting in overall reduction in the loan period.
Its a excellent scheme and unlike the auto loan, in the HL scheme there is no additional 0.25% interest.
Yes, This is same as OD Home Loan. But I dont know anything about OD Home Loan scheme so cannot comment on additional 0.25%.

What is additional 0.25% interest ?
Additional 0.25% is for the flexibilty SBI provides you.

When I took OD loan, loan officer informed me that I am the first to take the OD loan from the branch since it was established. [lol]. I am not sure if I was first one for car loan or first one to take OD loan for any type of loan.
 
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Then from the day you remove Rs.50,000, your interest and EMI and would be calculated as Rs, 2,50,000.



No penalty for pre pay in SBI. That's what loan officer informed me.



This is only available with SBI.



Yes, This is same as OD Home Loan. But I dont know anything about OD Home Loan scheme so cannot comment on additional 0.25%.



Additional 0.25% is for the flexibilty SBI provides you.

When I took OD loan, loan officer informed me that I am the first to take the OD loan from the branch since it was established. [lol]. I am not sure if I was first one for car loan or first one to take OD loan for any type of loan.
But say I put 3 lakhs I won't get interest on that right ? Have you taken the loan for 7 years ?
.
 
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But say I put 3 lakhs I won't get interest on that right ? Have you taken the loan for 7 years ?
.
Yes , Suppose you have taken loan for 5 lacs and if you deposit 3 lacs in your OD account. You have to pay interest only for rest of 2 lacs.

Yes I have taken loan for 7 years.
 
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Yes , Suppose you have taken loan for 5 lacs and if you deposit 3 lacs in your OD account. You have to pay interest only for rest of 2 lacs.

Yes I have taken loan for 7 years.
No my question here is if I deposit 3 lakhs in a fd I will get interest right by say 9% but here I dont get any interest right ? So the money is just lying there yes I agree you get reduced installments but what actual advantage is here ? Iam sorry finance is my weak point .
 
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No my question here is if I deposit 3 lakhs in a fd I will get interest right by say 9% but here I dont get any interest right ? So the money is just lying there yes I agree you get reduced installments but what actual advantage is here ? Iam sorry finance is my weak point .
Yes, you dont get any interest in hand. However you save on the auto loan interest (which is 11.25%). So in reality you are earning (11.25-9)=2.25% more than a FD deposit.
 
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Yes, you dont get any interest in hand. However you save on the auto loan interest (which is 11.25%). So in reality you are earning (11.25-9)=2.25% more than a FD deposit.
Thanx that's great you are a expert man [clap] iam in advance trying to warn you that when I buy a new car you are going to get a lot of Pms from me regarding finance [evil]
 
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@Raja, as chayan said you dont get anything but your interest goes down considerably. And interest rate is 11.25% which is 2.25% more than 9%. So you save 2.25%. And alos you get flexibility to withdraw the money you need whenever you want. But in case with FD, you have to break entire FD and you also won't get interest for watever time you kept. Here interest is calculated on daily basis. Hope this helps.

You can PM me or call me anything, as we both are in Mumbai. I may be able to help you. [:D]
 
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Hi Dharmesh,

I have doubt on the example

"Suppose loan is for Rs.5,00,000, You take loan using SBI Over draft facility. After few months you pre pay 4,00,000. So what you pay now is interest only for Rs. 1,00,000. But Rs.4,00,000 you pre paid can be withdrawn and use if required. So here you maintain your liquidity plus you pay less EMI. So instead of keeping money in your savings account, you can keep money in your over draft account, withdraw as per your will and use it."

Please help me understand how the interest calculation would be different from regular loan process.

In regular loan process, when I pay 4L out of 5L loan, still the interest would be recalculated for the remaining 1L and my EMI would be adjusted accordingly right?
 
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