Car Loan
A car loan is a financing option that helps you buy a vehicle by paying the amount in monthly instalments instead of upfront. In India, car loans come with attractive interest rates, flexible EMIs, and repayment tenures of up to 7–8 years. Many banks and NBFCs also offer up to 100% funding of the car’s on-road price, making it easier and more affordable to own a vehicle.
Compare Car Loans
Here’s a quick look at some of the best car loan schemes in 2025, along with their starting interest rates and maximum repayment tenures:
| Name of the Bank | Interest Rate (p.a.) | Tenure |
|---|---|---|
| State Bank of India | 8.75% p.a. onwards | Up to 7 years |
| Indian Overseas Bank | 7.80% p.a. onwards | Up to 7 years |
| IDFC First Bank | 9.99% p.a. onwards | Up to 10 years |
| Jammu and Kashmir Bank | 9.20% p.a. onwards (floating)8.70% p.a. onwards (fixed) | Up to 7 years |
| Canara Bank | 7.70% 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 | 8.50% p.a. onwards | Up to 7 years |
| Karur Vysya Bank | 9.00% 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 | 7.95% p.a. onwards (floating)8.65% p.a. onwards (fixed) | Up to 7 years |
| Yes Bank | Contact the bank | Up to 8 years |
| Karnataka Bank | 9.07% p.a. onwards | Up to 7 years |
| Federal Bank of India | 10.00% p.a. onwards | Up to 7 years |
| Equitas Small Finance Bank | 9.00% p.a. onwards | Up to 7 years |
| Punjab National Bank | Floating: 7.80% p.a. onwards Fixed: 8.45% p.a. onwards | Up to 7 years |
| Union Bank of India | 7.80% p.a. onwards | Up to 7 years |
| Axis Bank | 8.75% p.a. onwards | Up to 7 years |
| Bank of Baroda | Fixed: 8.60% p.a. onwardsFloating: 8.15% p.a. onwards | Up to 7 years |
| Tamilnad Mercantile Bank | 9.75% p.a. onwards | Up to 7 years |
| Bank of India | 7.85% p.a. onwards | Up to 7 years |
| Bank of Maharashtra | 7.70% p.a. onwards | Up to 7 years |
| Central Bank of India | 7.85% p.a. onwards | Up to 7 years |
| Indian Bank | 7.75% p.a. onwards | Up to 7 years |
| UCO Bank | 7.60% p.a. onwards | Up to 7 years |
| Bandhan Bank | 9.47% p.a. onwards | Up to 7 years |
Note: Car loan interest rates vary across banks and lenders. That’s why it’s important to compare rates, fees, and tenure options before selecting the best auto loan for your needs.
Types of Car Loans
1. New Car Loan
A new car loan is designed for purchasing a brand-new vehicle directly from the showroom. Depending on the lender, interest rates may differ, and many banks offer up to 100% financing on the car’s on-road price.
2. Used Car Loan
Used car loans help you buy a pre-owned vehicle, with lenders typically offering 80%–85% of the car’s value. These loans come with competitive rates and repayment tenures of up to 5 years, though some banks only finance cars that are less than five years old.
3. Loan Against Car
A loan against car allows you to use your existing vehicle as collateral to raise funds. This option is useful during financial emergencies or when you have a low credit score, as the car serves as security for the lender.
Car Loan Tips: Save Money & Speed Up Approval
To get the best car loan deal, maintaining a strong credit score is essential. A higher score not only increases your chances of quick approval but also helps you secure lower interest rates. Car loans generally do not require separate collateral, as the vehicle itself acts as security for the lender.
Key Components of a Car Loan
Monthly EMIs: Fixed payments made every month, consisting of both principal and interest.
Down Payment: The initial amount you pay upfront while purchasing the car.
Loan Tenure: The total duration of the loan, during which EMIs must be repaid.
Interest Rate: The rate at which the lender charges interest on your loan amount.
Principal Amount: The actual money borrowed to buy the car, excluding fees and interest.
How to Apply for a Car Loan
1. Online Application
Most banks and lenders allow you to apply for a car loan online. The process is simple:
Visit the lender’s official website.
Go to the Car Loan section and click Apply Now.
Fill in the required personal and financial details.
Upload the necessary documents.
A loan officer will contact you to complete verification and take the process forward.
2. Offline Application
You can also apply for a car loan by visiting the nearest bank branch. Submit your documents, complete the verification process, and the loan will be sanctioned once everything is approved.
Eligibility Criteria for a Car Loan
Car loan eligibility may vary across lenders, but most banks follow these basic requirements:
Age: Applicant should typically be between 18 and 75 years.
Income: Minimum net monthly income of around ₹20,000.
Employment Stability: At least 1 year of work experience with the current employer or business.
Profession: Open to salaried and self-employed individuals, whether working in government or private organizations.
Documents Required for a Car Loan
To verify your eligibility, lenders ask for certain documents. While requirements may vary from bank to bank, the commonly requested 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: Always confirm the exact list of documents required by your lender, as it may vary based on your profile and loan type. The documentation for a used car loan is generally the same as that required for a new car loan.
Checklist to Follow Before Applying for a Car Loan
Flexible Overdraft Loan Facility
| 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. |
Car Loan EMI Calculator
Before applying for a car loan, using an EMI calculator helps you understand your monthly repayment amount. Simply enter basic details like the loan amount, tenure, interest rate, and processing fee, and the calculator instantly shows your EMI—saving time and helping you plan better.
Benefits of Using a Car Loan EMI Calculator:
Provides a clear breakup of your total repayment.
Helps you plan your budget with accurate EMI estimates.
Offers quick, precise results with no manual calculations.
Saves time by displaying the EMI instantly.
How to Calculate Car Loan EMI?
Your car loan EMI depends on four main factors: the loan amount, interest rate, loan tenure, and processing fees. EMIs are calculated using a standard formula:
EMI = P × R × (1+R)ⁿ / [(1+R)ⁿ – 1]
Where:
P = Principal loan amount
R = Monthly interest rate
n = Loan tenure in months
A higher loan amount or a shorter tenure will increase your EMI. To find the right balance between affordability and repayment duration, it’s best to use a car loan EMI calculator for quick and accurate results.
Choosing the Right Car Loan
Compare Options: Always compare car loan offers from multiple lenders to find the best deal.
Check Interest Rates: Pick a loan that offers the lowest rate while meeting your required loan amount.
Stay Within Budget: Finalize your car model before applying and ensure its cost fits your financial plan.
Look for Hidden Charges: Review processing fees, foreclosure charges, and any extra costs that may not be visible upfront.
Use Special Offers: Keep an eye out for festive discounts, rate cuts, or promotional schemes from banks.
Consider Insurance Costs: Car insurance is a recurring expense, so include it in your total budget before deciding.
Features & Benefits of Car Loans
Car loans in India come with several advantages that make buying a vehicle easier and more affordable. While individual lenders may offer their own customised benefits, the common features include:
Easy Vehicle Ownership: Car loans help you buy a car without needing the full amount upfront.
High Loan Amount: Many lenders finance up to 100% of the on-road price, and some even offer loan amounts in crores.
Secured Loan Type: The car itself acts as collateral, keeping the approval process simpler.
Flexible Eligibility: Even applicants with moderate credit scores may qualify, depending on the lender’s policy.
Fixed Interest Options: Many banks offer fixed-rate loans, ensuring stable and predictable EMIs.
Credit-Score Benefits: A strong credit score can help you secure lower interest rates.
Available for All Car Types: Loans are offered for both new and pre-owned vehicles.
FAQs
How much car loan can I get based on my salary?
Most lenders finance 80% to 100% of the car’s on-road price. Your loan amount depends on your income, existing EMIs, and credit score.
Can I get a car loan with a low credit score?
Yes, some lenders approve loans even with a low credit score, but interest rates may be higher. A bigger down payment can improve your chances.
Will my car be hypothecated?
Yes. The car remains hypothecated to the lender until the full loan amount is repaid. After closure, the hypothecation can be removed from the RC.
Which car models are eligible for car loans in India?
Most lenders finance hatchbacks, sedans, SUVs, MUVs, and even some commercial vehicles unless specifically excluded.
Missing EMIs can lead to penalties, a drop in your credit score, and repeated defaults may result in vehicle repossession.
Most lenders finance hatchbacks, sedans, SUVs, MUVs, and even some commercial vehicles unless specifically excluded.
Can I get 100% funding to buy a car?
Yes, select lenders offer full financing of the car’s on-road price.
Will a high credit score get me a lower interest rate?
Yes. A score of 750+ usually helps you secure better rates and offers.
Can I transfer my car loan to another bank?
Yes, you can opt for a balance transfer if another bank offers lower interest or better terms.
Do I need a guarantor for a car loan?
Generally, no. But if your income is low or unstable, the lender may require a co-applicant or guarantor.
What are the common car loan tenures?
Repayment periods typically range from 12 to 84 months (1–7 years).
Can I prepay my car loan?
Yes, you can prepay the loan and save on interest. Some banks allow prepayment only after completing six months of the tenure.
What credit score is ideal for a car loan?
A score above 750 is ideal, though lenders may consider applications with scores above 600 at higher rates.
Does credit score affect the interest rate?
Yes. Higher credit scores often lead to better interest rates.
What is the minimum credit score required?
Most lenders prefer a minimum score of 700, though some may approve loans with 650, possibly with higher rates or a larger down payment.
Should I take a loan from a bank or dealership?
Compare offers from both. Choose the one providing better rates, lower fees, and suitable terms.
Do banks finance used cars?
Yes, many banks and NBFCs offer loans for pre-owned vehicles.
How much down payment do I need?
A higher down payment reduces your loan amount and may help you secure a lower interest rate.
What do lenders check during loan approval?
They review your credit score, income, job stability, existing debts, and repayment capacity.
What is the lowest EMI I can get?
Your EMI depends on the loan amount, tenure, and interest rate. Use an online EMI calculator to find the most affordable option.