A car loan is an arrangement that lets you borrow money to buy a car and pay it back over time with interest.
Car loans in India have low interest rates and a maximum repayment period of eight years. Loans from certain lenders may cover up to 100% of the car’s on-road cost.
To select the best options, you can examine the interest rates offered by different lenders for Car loans. Lenders will provide you with a car loan at a low interest rate if your credit score is high.
Compare Car Loans in India 2025
Here is a comparison of the initial interest rates and conditions of some of the best Car loan plans for 2025:
| Name of the Bank | Interest Rate (p.a.) | Tenure |
| State Bank of India | 9.10% p.a. onwards | Up to 7 years |
| Indian Overseas Bank | 8.60% p.a. onwards | Up to 7 years |
| IDFC First Bank | 9.99% p.a. onwards | Up to 10 years |
| Jammu and Kashmir Bank | RLLR + 0.75% p.a. onwards (floating)
RLLR + 0.25% p.a. onwards (fixed) |
Up to 7 years |
| Canara Bank | 8.20% p.a. onwards | Up to 7 years |
| HDFC Bank | 9.40% p.a. onwards (Rack Interest) | Up to 7 years |
| IndusInd Bank | 8.00% p.a. onwards | Up to 5 years |
| ICICI Bank | 9.10% p.a. onwards | Up to 7 years |
| Karur Vysya Bank | 9.25% p.a. onwards | Up to 7 years |
| South Indian Bank | 8.75% p.a. onwards | Up to 7 years |
| Kotak Mahindra Bank | Contact the bank | Up to 7 years |
| IDBI Bank | 8.65% p.a. onwards (floating)
9.20% p.a. onwards (fixed) |
Up to 7 years |
| Yes Bank | Contact the bank | Up to 8 years |
| Karnataka Bank | 8.88% p.a. onwards | Up to 7 years |
| Federal Bank of India | 9.00% p.a. onwards | Up to 7 years |
| Equitas Small Finance Bank | 9.00% p.a. onwards | Up to 7 years |
| Punjab National Bank | Floating: 8.35% p.a. onwards
Fixed: 9.35 p.a. onwards |
Up to 7 years |
| Union Bank of India | 8.20% p.a. onwards | Up to 7 years |
| Axis Bank | 9.40% p.a. onwards | Up to 7 years |
| Bank of Baroda | Fixed: 8.80% p.a. onwards
Floating: 8.90% p.a. onwards |
Up to 7 years |
| Tamilnad Mercantile Bank | 10.25% p.a. onwards | Up to 7 years |
| Bank of India | 8.75% p.a. onwards | Up to 7 years |
| Bank of Maharashtra | 8.20% p.a. onwards | Up to 7 years |
| Central Bank of India | 8.35% p.a. onwards | Up to 7 years |
| Indian Bank | 8.25% p.a. onwards | Up to 7 years |
| UCO Bank | 8.35% p.a. onwards | Up to 7 years |
| Bandhan Bank | 9.47% p.a. onwards | Up to 7 years |
Note: Banks will have different interest rates. Comparing interest rates is therefore essential before deciding which vehicle loan is best to apply for.
Types of Car Loan
The following lists several types of Car loans:
• New Car Loan: You can buy a brand-new car right out of the showroom with a new car loan. The interest rates will differ depending on the bank. It may be possible to get a loan up to 100% of the car’s on-road price.
• Used Car Loan: For a loan period of up to five years, lenders provide used Car loans up to 80–85% of the car’s purchase price at competitive interest rates. Nonetheless, some lenders may grant loans for vehicles bought during the previous five years.
• Loan against Car: In times of extreme financial need, a person may be able to secure enough money to buy a new car by using their old vehicle as collateral. We call this a loan secured by a car. You can use your old car as collateral to get some much-needed money from the bank if your credit score is low.
Tips for Car Loans: Reduce Cost and Obtain Approval More Quickly
• Check your credit score: To get a car loan, a borrower must have a solid credit score to get started. If your credit score is high, lenders will provide low interest rates in addition to expediting the loan approval process.
• No Collateral: Borrowers need not submit any securities or collateral. The vehicle serves as security.
• Make On-Time Bill Payments: You need to have a reasonable debt-to-income ratio (DTI) and a minimal monthly pre-tax income to be eligible for a loan to buy your ideal car.
• Search for Car Loan Options: You can obtain a loan to buy a new or used car through a variety of options on the market. To select the one that best suits your needs, you should compare the interest rates offered by several banks and Car financing companies.
• Reduce Your Borrowing: You can lower the amount you will need to borrow to match the price tag of the car you have selected by making a higher down payment up front.
• Choose a plan that fits you: An applicant’s ability to repay a loan has a significant influence on whether or not their application is approved. Make sure you select a loan plan that you can afford when you decide to take out a loan to buy the car of your dreams.
• Pay Attention to the Loan Terms: You might not be able to afford a vehicle loan with cheap monthly EMIs, but with a longer term. You should always attempt to choose a plan with the lowest interest rate and the shortest loan length before deciding on your financing plan.
Key Factors of a Car Loan
The main components of a car loan are as follows:
• EMI: The EMI that needs to be paid each month is known as the monthly instalment. Interest and principal make up an EMI.
• Down Payment: The down payment is the sum of money paid up front when buying a car.
• Loan Term: The length of time the loan is available. EMIs have to be paid for the chosen time.
• Interest Rate: The interest rate that the lender charges on a vehicle loan that has been taken out.
• Principal Amount: The sum borrowed to purchase the vehicle. No fees or interest assessed by the bank are included in the principal amount.
How to apply for a Car loan?
Online
Applying for a car loan online is possible with most lenders; the procedures are described here:
• To apply for a loan, you must go to the lender’s official website.
• Click “Apply Now” in the section for Car loans.
• Enter the pertinent information.
• You can upload the papers.
• You will receive a call from a customer service agent to handle the request.
Applying for a car loan in person at the bank location is an option. The relevant paperwork must be submitted. Following the completion of the verification process, the loan will become available.
Offline
Applying for a car loan in person at the bank location is an option. The relevant paperwork must be submitted. Following the completion of the verification process, the loan will become available.
Eligibility for Obtaining a Car Loan
Various banks may have different requirements for qualifying for Car loans. The following are the standard criteria:
• A borrower must satisfy the minimum age requirement of 18. The maximum age is 75.
• A borrower must show a monthly income of Rs. 20,000.
• A minimum of one year of service with the present employer.
• Must be self-employed or salaried, hired by a commercial enterprise or a government agency.
Documents Needed to Get a Car Loan
A car loan borrower must present all the required documents to satisfy their eligibility. The typical documents will be as follows, though this is also unique to each lender:
| Requirements | Individuals |
| Identity proof (any of the following) | Aadhaar, Passport, Driving license, Voter’s 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: Verify the precise documentation the lender requires. The documentation needed may also vary based on your circumstances. The same document is needed to apply for a used car loan.
Checklist to Follow While Applying for a Car Loan
| Steps | Requirement | Inference |
| Application | Compare all offers available | To locate the loan that gives you the most money and the lowest interest rate |
| Submit Income Proof | Bank Statement (last 6 months), Pay-Slips (last 3 months), IT Returns (last 2 years) | The lender wants to make sure you can pay back the loan. |
| Submit Proof of Address and Identity | PAN Card, Voter’s ID, Aadhaar Card, Passport, etc. | The lender seeks proof of your identification, nationality, and permanent residence. |
| Credit History | PAN Card | The lender wants to review your credit history to determine whether you can be relied upon to make timely payments. |
| Information About Vehicle | Sales receipts from the dealership where the car was bought | The lender needs to attest that the transaction was completed as planned. |
| Proof of Insurance and Driving License | Copies of your driver’s license and the car’s insurance | Regarding the purchased vehicle, the lender must prove that all legal requirements and procedures are met. |
Which is better for you, a personal loan or a car loan?
We frequently turn to loans in order to finance large purchases, like cars. Two of the largest and most popular lending alternatives available to consumers are personal loans and Car loans.
You can utilize a personal loan for anything. Nonetheless, Car loans are especially accessible for the purchase of a Car. You can review the benefits and drawbacks of both items to gain a better idea.
The benefits and drawbacks of Car loans
Benefits
• Typically, interest rates are low.
• It’s simpler to utilize.
• A person with a mediocre credit score is also likely to be approved for the loan because it is secured.
• The car itself serves as collateral for the loan.
Drawbacks:
• A deposit payment will be needed from you.
• Only when all payments have been fulfilled will you be granted full ownership of the vehicle, which will be hypothecated to the bank.
Therefore, it is advised that you consider several loan possibilities before deciding on the one that best suits your requirements.
Calculator for Car Loan EMI
You can use a car loan EMI calculator to see the monthly payments if you want to get a loan to buy a four-wheeler. Only essential information like the loan amount, processing fee, tenure, and interest rate needs to be entered into the user-friendly calculator. Time is saved because the results are shown right away as the information is entered.
The following are some of the primary benefits of utilizing a Car loan EMI calculator:
• There will be a detailed breakdown of the total amount owed.
• Since you would be aware of the EMIs, you can plan your budget.
• The results are accurate.
• Saves time because the results are shown right away.
Check out how the Car loan is calculated.
A few important elements will determine the Equated Monthly Instalments (EMIs) you pay.
Any kind of loan’s EMI is primarily determined by a formula. The following is the formula:
E = \(1+R)^n – 1} / P x R x (1+R)^n
, where “E” represents the amount of EMI you owe,
The letter “P” represents the main amount.
The letter “R” represents the interest rate that applies to your Car loan.
and “n” represents the car loan’s term (in months).
• The loan amount.
• The interest rate that applies to the loan.
• The tenure of the loan.
• The processing fees.
Your EMI will increase as the loan amount does. In a similar vein, the EMI increases with a shorter loan term. Use our vehicle loan EMI calculator to get the optimal balance between duration and an affordable EMI.
Selecting the Best Car Loan
A lender can assist you in evaluating the several Car loan choices that are open to you.
• Interest Rate: Select a loan that provides you with the required loan amount and the best interest rate.
• Don’t complicate: Before applying for a loan, decide which car you want and confirm that the price is within your means.
• Hidden Fees & Charges: Occasionally, there will be a hidden element to something that seems apparent. It’s critical to look for any unstated costs and expenses.
• Special offers: When you apply for a loan, you might be able to take advantage of special offers. See to it that you utilize them.
• Insurance: Since this is a recurring expense, check the car’s insurance premium.
Benefits & Features of Car Loans
The following features and advantages are often available when it comes to Car loans in India. Please take note that the following is a broad overview of the benefits that Car loans provide. For their clientele, lenders may have extremely specialized and tailored offers.
• Even if you don’t have the entire cash up front, Car loans in India enable you to buy a car.
• The majority of lenders finance the whole on-road cost, frequently without requiring a down payment.
• You have a lot of options when it comes to choosing your car because some banks offer loans in crores.
• The car is typically used as collateral for secured Car loans.
• Car loans are easier to obtain than other types of loans, and depending on the lender, even people with poorer credit ratings may be eligible.
• Numerous loans have set interest rates, which guarantee consistent monthly instalments.
• Your credit score is frequently used to determine interest rates; higher scores might result in lower borrowing costs.
• Both new and second-hand Cars are eligible for Car loans.
Bank vs. Dealership Car Loan: Which to Pick
Most buyers find banks to be cost-effective since they typically have clear terms and cheaper interest rates. Dealerships offer ease and quicker processing, frequently combining savings or insurance. Dealer loans, however, could include additional fees or higher interest rates. A bank loan is preferable if you value savings; if you want quickness, choose the dealership. Before choosing a course of action, always weigh your options.
Steps and Things to Take Into Account When Foreclosing on a Car Loan
You can pay back a Car loan in Equated Monthly Instalments (EMIs) throughout the repayment period. You will be foreclosing or prepaying your loan, though, if you choose to settle the balance before the conclusion of your term.
While certain lenders may permit you to foreclose or prepay your auto loan without incurring penalties, the majority of lenders provide this option for a penalty fee.
Axis Bank, ICICI Bank, Kotak Mahindra Bank, and HDFC Bank are among the banks that offer top-ups on loans.
