Tata Nano: How would Bank Loans look
By Vaibhav Aggarwal
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The dreams of a common man who wants to own a four-wheeler will soon come to reality with the launch of Rs 1 lakh car named after the smallest unit of science called Nano. It is less than half the price of the cheapest car available in the market and therefore it is better known as the "People's Car".

Tata Nano is the world's cheapest car but it is going to be a real car with all the basic features. The car has a 624 cc engine that is built of aluminum, 33 HP petrol engine and meets Bharat stage III emission norms. It will meet all the current safety norms and all emission criteria and moreover the pollution emitted by it is going to lower than two wheelers. The car is designed with the family in mind and has a seating capacity of four persons. Although Nano is about 8% shorter in length than Maruti 800 but it is 21% more spacious than the latter. It would be available in three variants, one standard model and two deluxe models with air conditioning.

The car will carry a price tag of Rs 1 lakh apart from the Value Added Tax and transporting charges. It will be priced between Rs 1 lakh and Rs1.34 lakh. The auto marker has cut costs by minimizing components, particularly steel, and took advantage of India's low production costs. The car is expected to be launched on March 23rd in Mumbai and thereby it will be displayed in showrooms across the country in the first week of April.

The low cost car that will attract customers mainly from the lower middle class and hence it is going to be a risky proposition for most lenders that will extend car loan for the Nano. In fact some lenders have decided to extend booking finance for the vehicle but that the interest rate charged on the loan will be higher during the booking period. The main reason behind this is that lenders expect the rush for loans from the less well off people with whom the risk association is more. Hence banks will charge higher interest rates at the booking stage and after the car is delivered and the lender can mortgage against it, interest rate will be lowered for the rest of the tenure.

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