DEPARTMENT OF BUSINESS ADMINISTRATION

UNIVERSITY OF LUCKNOW
Management of financial services
TERM PAPER
TOPIC
vehicle loan

Submitted to:
Submitted by:
Mr. Amit kumar
Saddam husain
Assistant professor
ASHISH KUMAR
Rahul rawat
Utkarsh awasthi

Evaluating credit for applicant

The credit evaluation process involves
following three steps
Gathering credit information about
applicants
Determining the credit worthiness of
the applicants
Taking a decision to grant lending
facilities

Gathering credit information about applicant

Credit department of a bank gathers from different sources the
requisite information on which applicant evaluation must
necessarily be based. Two important factors should be kept in
mind while searching for credit information
cost
time
Following are some methods by which gathering credit information
Interview-an interview with the applicant enables the bank to
secure the information about the history of the borrowers
business
Financial statement-the Financial statements ,including the B/S
and the P&L a/c of the prospective borrower
Reports of credit rating agencies-banks can gather
information on the creditworthiness of the applicant by procuring
financial reports from credit rating agencies

Determining the creditworthiness of the applicant

An analysis for the creditworthiness of the applicant,

therefore, calls for a detailed investigation of the
five Cs of credit- character, capacity, capital,
collateral and conditions.
There are a number of useful techniques with which
a banker can evaluate the five Cs of an applicant.
ratio analysis
cash flow projections
funds-flow statement
credit scoring

Taking a decision to grant lending facilities

After determining the creditworthiness of the
applicant, the lending officer has to decide whether
or not credit facilities should be provided to him .if
the creditworthiness of the applicant should be
matched against the credit standards set out in
loan policy. if the applicant is above or up to the
standards, the loan should be made to him. the
difficulty in taking a credit decision arises where the
applicant is marginally creditworthy. the decision
should be taken only after matching the potential
profitability against the cost of the debt loss.

SBI NEW CAR LOAN SCHEME

SBI offers you the best deal for financing your new car. Lowest interest rates,
lowest EMI, minimal paperwork and quick disbursement.
Salient features:
Lowest Interest Rates & EMI;
Longest Repayment Tenure (7 years);
Financing on On-Road price':
On-Road price includes Registration, Insurance and Extended Warranty/ Total Service
Package/ Annual Maintenance Contract/ Cost of Accessories

Interest calculated on Daily Reducing Balance;

No Pre-Payment Penalty or Foreclosure Charges;
No Advance EMI;
We also reimburse finance for the cars purchased out of your own funds at
rate of interest applicable to New Car Financing:
Car should not be more than 3 month old

Optional SBI Life Insurance cover available;

Overdraft facility available.
SBI usually provide loan of 85% of car price (considering the on road price).

What is the purpose of loan?

For purchase of new passenger cars, Multi
Utility Vehicles (MUVs) and SUVs
Banks are offering these loans to its
customers at attractive rates to increase
the consumer base
India is witnessing a surge in sales in the
automotive sector.
This increase in the demand of automotive
can be attributed to the ease of availability
of automobile loans by various banks.

Who are eligible for loan?

To avail an SBI Car Loan, you should be an individual aged 21 to 65 years, belonging to one of the following 3 categories:

Category

Income Criteria

Max. Loan Amount

Regular employee of
State / Central
Government, Public
Sector Undertaking,
Private Company or a
reputed establishment

Net Annual Income of

applicant and/or coapplicant if any,
together should be a
minimum of Rs.
3,00,000/Net Profit or Gross
Taxable income of Rs.
4,00,000/- p.a.
(income of co-applicant
can be clubbed together)

48 times of the Net

Monthly Income

Regular employee of
State / Central
Government, Public
Sector Undertaking,
Private Company or a
reputed establishment

4 times Net Profit or

Gross Taxable income as
per ITR after adding
back depreciation and
repayment of all existing
loans

SBI car Loans Interest Rates w.e.f. 05.10.2015

(Base Rate 9.30 % p.a.)
Scheme Name Tenure
SBI
Car
Loan For All Tenure
Scheme

interest rate

interest rate

0.55% above
base rate i.e.
9.85% p.a.

0.50% above
base rate i.e.
9.80% p.a.

SBI Combo Loan For All Tenure

Scheme

0.55% above
base rate i.e.
9.85% p.a.

0.50% above
base rate i.e.
9.80% p.a.

NRI Car Loan

For All Tenure

0.55% above
base rate i.e.
9.85% p.a.

0.50% above
base rate i.e.
9.80% p.a.

Used Car Loans

Up to 3 years

7.60% above
Base Rate i.e.
16.90% p.a.

7.60% above
Base Rate i.e.
16.90% p.a.

0.80% above
base rate i.e.
10.10% p.a.

0.75% above
base rate i.e.
10.05% p.a.

SBI Nano Youth Car For All Tenure

Loan Scheme

What is the security?

Hypothecation of vehicle.
Record of vehicle hypothecation charges in the books of the Regional Transport
Office.
Security in the form of the surrender value of LIC policy, National Savings
Certificates, or units of UTI.
No. The car itself is the security for your loan. But your car will be
hypothecated with the bank and it involves some paper work.
Non-financial securities such as gold and non-specified securities like LIC policy
to be valued at a margin stipulated in the various schemes for finance against
such securities.
Tangible security, can be waived if the NRI has:
Maintained a good repayment track record, against a home loan for at least
three years.
Repaid a Term / Demand Loan, other than a loan against a specified security
as per repayment schedule.
Maintained a State Bank of India deposit account for at least 5 years with an
average deposit of Rs.50,000.00

Documents Required

You would need to submit the following documents along with the completed application form:
Proof of Identity : - (Copy of any one) Passport/ PAN Card/ Voters ID card/ Driving License etc. Address
Proof :- (Copy of any one) Ration card/Driving License/Voters ID card/Passport /Telephone Bill/
Electricity bill/Life Insurance policy

Salaried

Non-Salaried/
Professional/Businessm
en

Person engaged in
agricultural and allied
activities.

Statement of
bank account for
last 6 months

Statement of bank account

for last 6 months

Statement of bank
account for last 6
months

2 passport size
photographs

2 passport size
photographs

2 passport size
photographs

Proof of Identity

Proof of Identity

Proof of Identity

Address Proof

Proof of Identity

Proof of Identity

What is EMI?
Equated Monthly Installment EMI for short is the amount payable every month to the bank or
any other financial institution until the loan amount is fully paid off. It consists of the interest on
loan as well as part of the principal amount to be repaid. The sum of principal amount and
interest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. This
amount has to be paid monthly. The interest component of the EMI would be larger during the
initial months and gradually reduce with each payment. The exact percentage allocated
towards payment of the principal depends on the interest rate. Even though your monthly EMI
payment wont change, the proportion of principal and interest components will change with
time.With each successive payment, youll pay more towards the principal and less in interest.
Heres the formula to calculate EMI:

where
Eis EMI
Pis Principal Loan Amount
ris rate of interest calculated on monthly basis.
nis loan term / tenure / duration in number of months

EXAMPLE OF TAKING LOAN FOR

HONDA AMAZE
Model no-Amaze 1.5VX(0) i-DTEC
ON ROAD PRICE Rs 8 Lack
Because of SBI provide loan upto 85%
apply loan Rs 6,80,000 for 5 years
SBI offer car loan @ 9.85% interest per year
Using EMI Formula
EMI calculated Rs 14398
Total payable interest for 5 years is Rs
1,83,871.
EMI Breakup=Total Interest(21.3%)+Principal
amount(78.7%)

EMI monthly Breakup

MonthYear

Principal(
A)

Interest
(B)

Total
Payment(A
+ B)

Outstandi Implied
ng
rate of
Balance
interest

2015

26,666.24

16,527.3
1

43,193.55

6,53,333.7
6

3.92%

2016

1,13,452.0
1

59,322.1
9

1,72,774.20

5,39,881.7
5

20.61%

2017

1,25,145.6
0

47,628.6
0

1,72,774.20

4,14,736.1
6

39.01%

2018

1,38,044.4
5

34,729.7
5

1,72,774.20

2,76,691.7
0

59.31%

2019

1,52,272.8
1

20,501.3
9

1,72,774.20

1,24,418.8
9

81.70%

References
for preparing the project I uses the
following:
websites:
http://emicalculator.net/loan-calculator
http://emicalculator.net/
https://www.sbi.co.in>personal-banking
https://www.sbi.co.in>auto-loans-scheme

Thank you