Should you take a car loan from a PSU bank or a private one?

Both have their individual pros and cons.

While PSU banks usually require more documentation, take more time to process a loan, and generally try the patience of their customers, they usually offer lower rates, officially than private banks. This difference is even more marked in case of pre-owned cars, where the rates charged by private banks are, frankly, exorbitant.

Also, public sector banks may have qualifying criteria that are less strict, and will also charge lower processing fees. They are also more accommodating in case of emergencies when a customer defaults on a payment or two. A very well known new generation private sector bank has the dubious distinction of hiring goons in the guise of recovery agents who show up at your doorstep if your payment is delayed. On the flip side, PSU banks expect you to have a long banking record and may even insist on guarantors and collateral for the loan.

Private banks also have their plus and minus points. Wide availability, minimal documentation, no queues and helpful staff make the loan-application experience largely hassle-free. And if you are a good negotiator or have an existing relationship with the bank, you may even get a lower rate than what a public sector bank offers.

Private banks have considerable latitude in such matters, unlike public sector banks with their bureaucratic set-ups. Convenience is enhanced further by their tie-ups with dealers and insurance firms, making the whole transaction of buying a car, and getting it registered and insured, a smooth and fast process. However, they usually quote higher rates initially and may impose heavy fines for the slightest delay in payment, unlike public sector banks.

Ultimately, it's all a matter of individual choice and perception, and the best deal that you can get.