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Car loans in India come with appealing interest rates and flexible repayment tenures of up to 8 years. Some lenders may even provide financing for up to 100% of the car’s on-road price.
| Car Loan Details | |
|---|---|
|
Interest Rate (Monthly reducing balance) |
Starts from 8.70% p.a. |
|
Guarantor Requirement |
Varies with bank |
|
Pre-closure Charges |
Varies with bank |
|
Loan Tenure |
1 year to 8 years |
|
Processing Fee |
Depends on the bank |
– On This Page –
Car Loan Interest Rate Comparison for All Banks:
| Name of the Bank | Interest Rate (p.a.) | EMI for Rs.1 lakh for 7 years |
|---|---|---|
| State Bank of India | 8.85% p.a. onwards | Rs.1,596 onwards |
| Indian Overseas Bank | 8.85% p.a. onwards | Rs.1,601 onwards |
| Jammu Kashmir Bank |
| Contact the bank |
| Canara Bank | 9.85% p.a. onwards | Rs.1,594 onwards |
| HDFC Bank | 9.40% p.a. onwards (Rack Interest) | Rs.1,629 onwards |
| ICICI Bank | 9.10% p.a. onwards | Rs.1,614 onwards |
| Karur Vysya Bank | 9.55% p.a. onwards | Rs.1,637 onwards |
| South Indian Bank |
| Rs.1,596 onwards |
| IDBI Bank |
| Rs.1,599 onwards |
| Yes Bank | Contact the bank | Contact the bank |
| Karnataka Bank | 8.88% p.a. onwards | Rs.1,611 onwards |
| Federal Bank of India | 8.85% p.a. onwards | Rs.1,601 onwards |
| Punjab National Bank |
| Rs.1,596 onwards |
| Union Bank of India | 8.70% p.a. onwards | Rs.1,594 onwards |
| Axis Bank | 9.30% p.a. onwards | Rs.1,624 onwards |
| Bank of Baroda |
| Rs.1,604 onwards |
| Bank of India | 8.85% p.a. onwards | Rs.1,601 onwards |
Car loan interest rates can be either fixed or floating. A fixed interest rate stays the same throughout the entire loan tenure, unaffected by market fluctuations. In contrast, a floating interest rate changes periodically based on trends in the financial market.
The table below explains the differences between these two types of interest rates:
| Fixed interest rate | Floating interest rate |
|---|---|
| Interest rate is higher | Interest rate is lower |
| EMIs will remain constant | EMIs will change according to MCLR changes |
| Comes with lower risk | Comes with higher risk |
| Easy to prepare budgets with these rates | Tough to maintain budgets as rates keep changing |
| Offers security to borrowers | Offers savings to borrowers |
| Good for a short loan tenure (3 to 10 years) | Good for a long loan tenure (20 to 30 years) |
Here’s a comparison of some of the top car loan schemes available in 2024, highlighting their key features and starting interest rates:
| Bank | Features and Benefits |
|---|---|
| HDFC Car Loan |
|
| State Bank of India Car Loan |
|
| Axis Bank Car Loan |
|
| Federal Bank Car Loan |
|
| Canara Bank Car Loan |
|
| ICICI Bank Car Loan |
|
The Key Components of a Car Loan Include:
Monthly Installments: The Equated Monthly Installment (EMI) that needs to be paid every month. The EMI includes both the interest and the principal amount.
Down Payment: The initial amount paid upfront when purchasing the car.
Loan Term: The duration or tenure of the loan, during which the EMIs need to be paid.
Rate of Interest: The interest rate charged by the lender on the car loan.
Principal Amount: The actual amount borrowed to purchase the car, excluding any fees or interest charged by the bank.
Different Car Loan Options:
New Car Loan: This loan facilitates the purchase of a new car from a showroom, with interest rates varying by lender. Up to 100% of the car’s on-road price can be financed.
Used Car Loan: Lenders offer loans covering 80-85% of a used car’s price, with competitive interest rates and a tenure of up to 5 years. Loans are generally available for cars bought within the past 5 years.
Loan Against Car: For urgent financial needs, one can use their old car as security to get funds for a new car. Known as a Loan Against Car, this allows even those with a bad credit score to secure funds by pledging their old car.
Most lenders offer the convenience of applying for a car loan online. You can visit the lender’s official website to start your application. The process is straightforward, and you can submit all required documents online. If you have a good credit score, you might qualify for a pre-approved car loan, which means no additional documents are needed.
You can also apply for a car loan by visiting a bank branch. You will need to submit the necessary documents in person. After the verification process is completed, the loan will be disbursed.
The Equated Monthly Installments (EMIs) that you will pay will depend on a few key factors.
The higher the loan amount, the higher your EMI will be. Similarly, the shorter the loan tenure the higher the EMI.
To calculate the EMI on your car loan, you can use the formula:
EMI=P×R×(1+R)N(1+R)N−1\text{EMI} = \frac{P \times R \times (1+R)^N}{(1+R)^N – 1}
where:
Manual calculations can be error-prone, complex, and time-consuming, so using an online personal loan EMI calculator is preferable. This calculator requires only a few basic details such as the interest rate, loan amount, and loan tenure.
Once these details are entered, the EMI amount is calculated instantly. Additionally, the calculator provides the total interest amount and an amortization schedule for easy reference.
To prove your eligibility for a car loan, you’ll need to provide certain documents. Although specific requirements may vary by lender, the common documents include:
| Requirements | Individuals |
|---|---|
| Identity proof (any of the following) | Aadhaar, Passport, Driving license, Voters ID card, PAN card |
| Address proof (any of the following) | Aadhaar, Passport, Driving license, Ration card, Utility bills |
| Proof of income | Form 16, Salary slips, if you are salaried, Latest Income Tax Returns, Bank statements going back 6 months |
Note: Make sure you check exactly what documents the lender wants. The documents required can change depending on your situation too. The documents required to take a used car loan are the same as above.
| Steps | Requirement | Inference |
|---|---|---|
| Application | Compare all offers available | To find the loan that offers you the highest loan amount and the most affordable interest rate |
| Submit Income Proof | Bank Statement (last 6 months) Pay-Slips (last 3 months) IT- Returns (last 2 years) | Lender wants to establish your ability to repay the loan |
| Submit Proof of Address and Identity | PAN Card, Voter's ID, Aadhaar Card, Passport, etc. | Lender wants to establish your nationality, identity, and permanent address |
| Credit History | PAN Card | Lender wants to check your past credit records and establish if you can be trusted to make regular repayments |
| Information About Vehicle | Sales Receipts from the showroom from where the vehicle was purchased | Lender must confirm that the deal was affected as intended |
| Proof of Insurance and Driving License | Copies of the vehicle's Motor Insurance and your Driving License | Lender must establish that all laws and protocols are followed with regard to the purchased vehicle. |
Compare: MakaanFinance.com helps you compare the car loan options available to you.
Interest Rate: Look for a loan that offers the best interest rate and meets your loan amount needs.
Keep it Simple: Choose your car before applying for the loan, ensuring the cost aligns with your budget.
Hidden Fees and Charges: Check for any hidden fees and charges that may not be immediately apparent.
Special Offers: Ensure you take advantage of any special offers available when applying for your loan.
Insurance: Consider the recurring cost of the car’s insurance premium.
In India, car loans generally come with the following features and benefits, though individual lenders may offer specialized and customized options.
When you’re ready to finance your new or used car purchase, opting for a pre-approved loan can streamline the process. Here are steps to quickly secure the funds you need:
Check Your Credit Report: Verify your credit score to understand your standing. A score of 750 or higher typically qualifies for lower interest rates. Scores between 650 and 750 may incur slightly higher rates. Address any defaults or improve a low score to avoid application rejection.
Maintain Timely Bill Payments: Ensure your bills are paid on time to demonstrate reliability in meeting financial obligations. This improves your credit profile and assures lenders of your ability to repay EMIs punctually.
Explore Car Loan Options: Research car loan interest rates offered by various banks and financing firms. Compare terms and conditions to find the best fit for your financial needs.
Minimize Borrowing Amount: Opt for a larger upfront down payment to reduce the loan amount. A smaller loan translates to either smaller EMIs or a shorter repayment tenure, ultimately reducing interest payments.
Select a Budget-Friendly Plan: Choose a repayment plan that aligns with your budget and financial capacity. Ensure you can comfortably manage the EMIs, especially if you have existing loans.
Review Loan Terms Carefully: Prioritize loans with lower interest rates and shorter tenures over lower monthly EMIs with extended repayment periods. Avoid potentially costly situations by understanding and agreeing to favorable loan terms.
Secure Comprehensive Car Insurance: Many lenders require full-coverage insurance to safeguard against financial losses in case of accidents where you are at fault. Ensure you have appropriate insurance coverage before finalizing your loan.
When you take out a car loan, you repay it in monthly EMIs over a specified period. If you decide to repay the remaining loan amount before the scheduled tenure ends, it’s referred to as foreclosing or prepaying your loan.
Most lenders offer a foreclosure option, typically with a penalty fee attached. However, some lenders may allow foreclosure without penalties.
If you have an existing car loan and need additional funds quickly for expenses like weddings, home renovations, or medical emergencies, you can opt for a top-up loan on your current car loan. Here’s what you need to know:
A top-up loan on your car loan offers a convenient way to access additional funds when needed, leveraging your existing loan’s repayment record and the value of your car.
Refinancing your car loan involves taking out a new loan to pay off your existing car loan’s remaining balance. Here’s what you need to know about car refinancing:
Car refinancing can be a strategic move to reduce costs and improve loan terms, especially when interest rates drop or your financial situation improves. However, careful evaluation of your current loan terms and financial goals is essential before proceeding with refinancing.
If you’ve financed the purchase of an Electric Vehicle (EV) with a car loan, here’s some important information about tax benefits available:
Purchasing an electric vehicle not only contributes to environmental sustainability but also offers substantial financial benefits through tax rebates on loan interest payments. This initiative aims to make electric vehicles more accessible and affordable for consumers, supporting the shift towards cleaner transportation options.
When it comes to acquiring a new car, you have two primary options: car loan financing and car leasing. Here’s a comparison highlighting the key differences between the two:
Car Loan (Financing):
Car Lease:
Choosing between a car loan and a car lease depends on your financial goals, driving habits, and preferences for vehicle ownership. Leasing offers flexibility and lower initial costs, while financing provides long-term ownership benefits and freedom to customize and drive without mileage restrictions. Assess your needs carefully to make the right decision for acquiring your next vehicle.
Small to medium-sized cars, Commercial Vehicle Loan, Sports Utility Vehicles (SUVs), and Multi Utility Vehicles (MUVs) generally qualify for car loans in India.
Most lenders in India do not require a guarantor. However, if your income doesn’t meet requirements, you may need a co-applicant or guarantor.
Repayment tenures typically range from 12 months to 84 months (1-7 years).
Yes, certain lenders offer up to 100% of the on-road price of the car as a loan.
Yes, you can prepay the loan. Most banks allow prepayment after 6 months, but there may be conditions or penalties.
Ideally, a credit score above 750 is recommended, but some lenders may consider scores above 600.
Yes, a higher credit score often leads to lower interest rates offered by banks.
Compare options from both to find better interest rates and terms that suit your needs.
Yes, many banks offer loans for purchasing used cars.
Lenders consider factors like credit score, employment status, income, residence stability, and debt-to-income ratio.
EMI depends on the loan amount, interest rate, and tenure chosen. Use an EMI calculator to estimate this.
A higher down payment can reduce the loan amount and potentially lower interest rates offered by lenders.
Yes, HDFC Bank charges Rs. 650 as documentation charges for car loans.
Yes, you can preclosure a car loan from HDFC Bank.
No, KYC documents are generally not required for a pre-approved car loan.
