Car Loan - A car loan is a financial agreement that allows you to borrow money to purchase a vehicle, which you repay over time with interest.
In India, car loans come with low interest rates and can be repaid over up to 8 years. Some lenders may offer loans covering up to 100% of the car’s on-road price.
You can compare the car loan interest rates offered by various lenders to choose the best option. Lenders offer car loans at low-interest rates if your credit score is high.
Here's a comparison of some of the best car loan schemes available in 2024, highlighting the starting interest rates and tenure:
Name of the Bank | Interest Rate (p.a.) | Tenure |
9.10% p.a. onwards | Up to 7 years | |
8.85% p.a. onwards | Up to 7 years | |
9.99% p.a. onwards | Up to 10 years | |
| Up to 7 years | |
8.70% p.a. onwards | Up to 7 years | |
9.40% p.a. onwards (Rack Interest) | Up to 7 years | |
8.00% p.a. onwards | Up to 5 years | |
9.10% p.a. onwards | Up to 7 years | |
9.60% p.a. onwards | Up to 7 years | |
8.75% p.a. onwards | Up to 7 years | |
7.70% p.a. onwards | Up to 7 years | |
| Up to 7 years | |
Contact the bank | Up to 8 years | |
8.88% p.a. onwards | Up to 7 years | |
8.85% p.a. onwards | Up to 7 years | |
Equitas Small Finance Bank | 9.00% p.a. onwards | Up to 7 years |
| Up to 7 years | |
8.70% p.a. onwards | Up to 7 years | |
9.30% p.a. onwards | Up to 7 years | |
| Up to 7 years | |
10.70% p.a. onwards | Up to 7 years | |
8.85% p.a. onwards | Up to 7 years | |
8.70% p.a. onwards | Up to 7 years | |
8.70% p.a. onwards | Up to 7 years | |
8.75% p.a. onwards | Up to 7 years | |
8.70% p.a. onwards | Up to 7 years | |
Bandhan Bank | 9.47% p.a. onwards | Up to 7 years |
Note: Interest rates will differ from one bank to another. This makes it critical to compare interest rates before choosing a best auto loan to apply for.
The different types of car loans are mentioned below:
It is vital that you maintain a good credit score when applying for an auto loan. Apart from the loan getting approved quicker, lenders will offer low interest rates if your credit score is good.
No security or collateral is required when availing a car loans. The car acts as the security.
The main components of a car loan are as follows:
Online
Most lenders provide the option to apply for a car loan online and the process is mentioned below:
You can visit the bank branch and apply for a car loan. The relevant documents must be submitted. Once the verification process is completed, the loan will be provided.
Offline
You can visit the bank branch and apply for a car loan. The relevant documents must be submitted. Once the verification process is completed, the loan will be provided.
The car loan eligibility criteria can be different for different banks. The common criteria are as follows:
To prove your eligibility, you'll need to provide certain documents. Though this too is specific to different lenders, the common documents will be:
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. |
When it comes to a big purchase, for example a car, we often resort to loans for financing the same. Both personal loans and car loans are two of the biggest and most common financing options that are availed by consumers.
A Personal Loan can be used for any purpose. However, car loans are particularly available for car purchases. To have a better understanding, you can check the pros and cons of both products.
Pros:
Cons:
However, it is advised that you compare different loan products and then choose the one that suits your requirements.
In case you wish to avail a car loan to purchase a four-wheeler, you can use BankBazaar’s car loan EMI calculator to check the monthly payments. The calculator is easy to use and only basic details such as the loan amount, processing fee, tenure, and interest rate must be entered. Once the details have been entered, results are displayed immediately, hence, saving time.
Some of the main advantages of using BankBazaar’s car loan EMI calculator are mentioned below:
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 find the best compromise between an affordable EMI and duration you should check out our car loan EMI calculator.
According to financial experts, it is always recommended to opt for a short-term loan in case you have bad credit. Even though the monthly payments will be reduced, the interest rates will be much higher for long-term loans.
The interest rates are usually high in case you have bad credit, and long-term loans will further increase it. Negative equity is another risk that comes with long-term loans as well. Negative equity comes into effect when the value of the car is lower than the loan amount.
The chances of the car needing repairs during the loan duration also increase. Over a duration of time, wear and tear occurs and there are chances of major repairs which could increase the costs as well.
When it comes to car loans in India, in general, the following features and benefits are offered. Note that the following is a generalised look at the advantages offered by car loans. Individually, lenders may have highly customized and specialized offers for their customer base.
When you want to receive funds to purchase the new or used car that you have been eyeing for a while, it is better that you opt for a pre-approved loan. To avail such a loan, you can follow a few steps to quickly receive the required funds.
To create a better credit profile, you should always pay your bills on time. If that is not possible then you can make timely payment of your bills at least 6 months prior to the loan application.
If you pay your bills on time, it assures the lender that you will also repay the Equated Monthly Installments (EMIs) on time. This, in turn, will help you secure a loan easily.
If you borrow a lesser amount, you will be in a better position to repay your loan quickly since a smaller loan amount means smaller EMIs or a shorter loan tenure. Additionally, the amount that you will have to pay to your bank or car financing organisation as interest will also reduce.
When you take an auto loan, you can repay it in Equated Monthly Instalments (EMIs) till the end of the repayment tenure. However, if you decide to pay off the outstanding loan amount before your tenure ends, you will be foreclosing or prepaying your loan.
The foreclosure/prepayment facility is offered by most lenders for a penalty fee though some lenders may allow you to foreclose/prepay your car loan without charging you any penalty.
You can foreclose your car loan if your income has increased, and you wish to clear off your liability. It also takes away your burden of having to make monthly EMI payments. Foreclosing a car loan will release the hypothecation on the car and give you full ownership.
As stated above, some lenders may charge you a penalty on loan foreclosure. Hence, before you decide to foreclose a loan, it is a good idea to go through the clauses associated with it carefully.
If, after taking a vehicle loan, you need quick or additional funds for purposes such as a wedding, home renovation, medical emergency, etc., you can get a top-up loan on your existing car loan. You can avail up to 150% of the car's value as a top-up loan.
Most lendersthat offer a top-up on their car loans will require you to maintain a clear payment record for at least 9 months. The process to avail a top-up loan on your existing car loan is quick and requires minimal paperwork.
Some of the banks that offer top-up on laons are HDFC Bank, Axis Bank, and Kotak Mahindra Bank.
In India, buying used cars are very popular. There are various finance options also available in case you wish to buy a pre-owned car. Most Non-Banking Financial Companies (NBFCs) and banks offer loans for pre-owned cars.
However, various points must be considered before buying a used car on loan. It is important that you compare the interest rates offered by various banks and NBFCs before selecting one. The loan tenure must also be chosen wisely. Even though the EMI amount will reduce for longer tenures, the interest rates would increase.
The rate of interest for used car loans ranges between 8.8% and 17%. It is vital that you check the processing fees that are being levied as well. Few NBFCs and banks charge a high processing fee.
Unless otherwise specified, almost all small to medium sized cars, Commercial Vehicle Loan, Sports Utility Vehicles (SUV), and Multi Utility Vehicles (MUV) come under the purview of car loans available in India.
Most lenders in India will not insist upon any guarantors; however, if your annual income does not match up to the expected requirement, then you may be expected to sign-up as a co-applicant and/or guarantor
Repayment tenures usually range from 12 months to 84 months (1-7 years).
Yes, certain lenders offer 100% of the on-road price of the car as a loan.
Yes, you can prepay the entire car loan and save on vital interest payments in the future. However, most banks will allow the pre-payment option after you have chalked off 6 months on your loan tenure.
Just like with most loans, a high credit score above 750 is ideal. But you can still apply for a loan if your credit score is above 600.
Yes. some banks will offer lower interest rates to applicants with high credit scores.
When you apply for a car loan, lenders will look for a credit score of at least 750. Some banks may offer you a car loan despite your low credit score but they may charge a higher interest rate.
Before you apply for any car loan, ensure that you explore all the options available. Once you explore, you will get an idea about the benefits offered by various lenders on their car loans. Compare the benefits offered and pick a lender that fits your requirements. Whether it is a bank or a car dealership, pick the one that offers better interest rates.
Yes, many top lenders such as SBI, HDFC Bank, etc., offer loans to buy used cars.
One of the most important factors that lenders consider before offering you a car loan is your credit score, The other factors that lenders look for when you apply for a car loan are your employment status, residence and job stability, income, debt-to-income ratio, etc.
The amount of EMI (equated monthly instalments) that you will be paying towards your car loan will depend on the interest rate, loan amount, and the repayment tenure you choose. You can calculate the EMI by using the EMI Calculator tool available on the BankBazaar website.
Making a higher down payment will mean that you will need to avail a lower loan amount to buy a car. When you avail a lower loan amount, there are chances that banks or lenders may offer you a car loan at lower interest rates.
Yes, the documentation charges that are levied by HDFC Bank are Rs.650 in case you avail a car loan.
Yes, you can preclose the car loan availed from HDFC Bank.
No, you do not have to submit any KYC documents in case you are eligible for a pre-approved car loan.
Tata Motors is set to launch three new cars. Among them will be an electric car. The electric car that will be launched by Tata is the Curvv. The other two cars that will be launched by the company are the Altroz Racer and the Nexon CNG. The Nexon CNG will be powered by a 1.2-litre engine, while the Altroz Racer will be powered by a 1.2-litre turbo petrol engine. The first car that will be launched will be the Tata Curvv.
The much-anticipated 2024 Hyundai Creta is finally being launched in Indian market on Tuesday 16 January 2024. The Hyundai Creta has been a popular vehicle among Indian customers with a customer base of 9.80 lakh customers.
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