Car Loan

Car Loans are availed by those planning on getting a new car. With such high automobile rates in India most of them opt for Car Loans when looking to buy a new car. Car Loans are provided by Banks and also by Non-banking Financial Companies. More details on car loans and pre-owned car loans are provided in the content below.

Last modified:2018-12-14

An Overview of Car Loan 

Car loans are the best way to fulfill your dream of owning a new car. Banks and a number of financing institutions across India provide cars loans for new cars and used cars. Owning a new card is a dream of many but the major challenge is the finances that do not cope up with. So, in order to give a helping hand to fulfill the dreams of many car loans are even provided by the car dealers through banks and also by non-banking financial institutions. Before availing the car loan one should make a through market research and choose the best car loan provided. The information given below will help you make the right choice.

Car Loans In India

Car Loans are provided by most of the banks and non-banking financial institutions in India. The major challenge one will face when a person decides to own car is the high automobile prices in India. The price range of automobile industry is much higher in India when compared to other countries. In this scenario, car loans provided by banks and non-banking financial institutions comes handy. Car loans can be availed on both new cars and for buying used cars. Car loans can be availed on Small to medium sized cars, SUVs and MUVs.

What are the Car Loan Interest Rates? 

Many who plan on purchase of a new car overlook the parameters associated with applying for car loan. Before deciding on the availing the car loan for the desired car type, one has to check the interest rates that being given by different banks. Interest rates are the primary expense that is charged towards car loan. So applying for banks that provide lowest rates would be beneficial, also if other charges towards car loan is at the minimum. Check the interest of various banks given below.

Bank Name

Interest Rates

Axis Bank

8.60% to 11.50%

Bank of Baroda

8.80% to 10.55%

Canara Bank

8.70% to 9.35%

Central Bank of India

Lowest of 8.85%

Corporation Bank

Lowest of 9.40%

HDFC Bank

8.45% to 12.50%

ICICI Bank

New Cars
Up to 23 months - 12.75%

24-35 months - 12%
36-84 months - 10%
Used Cars: 15%

IDBI Bank

Lowest of 9.95%

Indian Bank

Lowest of 9.30%

Punjab National Bank

Lowest of 9.25%

State Bank of India

8.90% to 9.40%

Syndicate Bank

Lowest of 9.40%

Union Bank of India

8.70% to 11.85%

What are the Other Service Charges and Fees that Accompany Car Loan?

Apart from the interest rates that are to be checked while applying for car loans, there are certain other information i.e. other service charges associated with car loan are also to be verified before going in for a car loan. There are loan providers who render lowest interest rates but higher rates of processing charges, prepayment charges, foreclosure charges, charges on documentation process and other related charges. Other parameters to check apart from interest rates are

  • Processing Fees
  • Documentation Charges
  • Prepayment Charges
  • Foreclosure Charges
  • Registration certificate collection charges
  • Charges for late payment of EMI
  • Loan Cancellation Charges
  • NOC Charges
  • Swap and Bounce Charges

What are the Documents Required to Obtain Car Loan?

Every loan that is being processed requires few documentation process and paperworks. See to that you are providing all the required documents for quick car loan sanction. The documents required when applying for car loan are

  • Signed application form along with the photograph of the applicant
  • Photo ID proof
  • Age proof
  • Residential proof
  • Income proof for Salaried
  • Salary Slip of last three months
  • Form 16 or Income Tax Returns
  • Income proof for Self-Employed
  • Income Tax Returns of Last three months
  • Last three years’ Balance sheet and Profit and Loss Account certified by a C.A.
  • Documents with Vehicle Information
  • A copy of Vehicle Motor Insurance and your Driving License

How to Choose the Best Car Loan in the Market?

Most of the banks or the non-banking financial institutions approve 95% to 100% of the car loan based on the ex-showroom price. With most of the banks offering almost equal interest rates it becomes difficult for the applicants to choose the best car loan, but here are some points that will help you.

  • Decide the car that you wish to buy and also if it is within your planned budget
  • Compare the Interest rates offered by the different banks
  • Check the percentage of car loan amount that will be approved and the loan tenure
  • Once checking on the interest rates, compare the other related charges applied
  • With the help on Online Car Loan EMI Calculator calculate the EMI amount to be paid
  • Check if the EMI amount is within your budget and doesn’t affect your monthly finances
  • Choose the best car loan with more pros than cons

What is the Car Loan Eligibility Criteria?

Like other loans car loans doesn’t have much of strict eligibility criteria but few basic eligibility to avail a car loan. One who fulfills the criteria has more possibility of getting their car loan sanctioned. The eligibility criteria are given below

  • Should be in the age group between 21 and 65 years
  • With Indian nationality
  • Salaried or Self-employed or a professional
  • In the same business for one year or two years in the same business
  • Get a pay that can make minimum repayment every month

How to Choose the Best Car Loan EMI Option?

There are number of online sites available to calculate the EMI amount of a car loan with the interest rate, loan amount and the tenure of the loan. They are easy to calculate and understandable. But the reason you have to check the EMI amount well in advance is that the EMI amounts are to be paid every month and it should not turn out to be a burden on your monthly finances. On choosing EMI for longer tenure it results in higher payment of interest or if you are choosing a loan with shorter loan term EMI paid per month will turn to be higher. Calculate the EMI amount and choose a loan with optimum EMI and lower interest paid.

What are the Checkpoints before Applying for Car Loan?

Before applying for Car Loan either with a bank or a non-banking financial company there are certain parameters you have to check on. Proper researching of different charges and car loan factors helps one to choose the best car loan option that is available. This helps to avoid unnecessary expenses and always be aware of all the charges which is accompanied with car loans. Some of the checkpoints you should look upon are listed below.

  • Interest Rate provided
  • Percentage of loan amount being approved
  • Other Related charges
  • EMI amount and your repayable capability
  • Check your Credit score - it determines the interest rate offered by the bank
  • Availability of all necessary documents
  • Customer relationship and services of the bank

Pre-owned Car Loan

Car loans are not limited to just buying brand new cars but are now available to buy used cars too. On the face of it, a used car is cheaper so clearly, the car loan amount required will be lower, and so will be the car loan EMIs. But in most cases, a used car requires a higher upkeep cost and there might be additional re-registration costs associated with it, neither of which will be covered by the car loan. So, for a large majority of the prospective car purchasers, approaching a bank or NBFC for new car loan options is preferred over used car loan options. Another factor is that the car loan approval is much swifter for a new car.

But buying a pre-owned car is not that bad of an option either. We here list down a few reasons why buying a Pre-used car via a car loan is a good deal too :

  • First and foremost, it is immensely pocket friendly. It is obvious that a second-hand car will cost less, thereafter, the pre-owned car loan financing it will also be a lesser amount compared to its new-car alternative, meaning smaller monthly installments to pay.
  • Plus, the insurance cost of a pre-owned car is lesser and the prospect of depreciation is considerably less when compared to new cars. So, you can retain its original value when you intend to resell it in the future.

What are the Features and Benefits of Car Loan?

  • Car loan tenure ranges from 3 to 7 years.
  • Car loan interest rates are negotiable based on your credit score, credit history and if you are already an account holder with the bank.
  • Most of the car loan providers don’t ask for a guarantor.
  • Car loans can be availed for small to medium sized cars, SUVs and MUVs. Car loans commonly come under Auto Loans.
  • Pre-owned car loans are provided by number of banks and other private financing companies.
  • Your loan application status can be checked in Online with just few information.
  • Car loans makes the dream of owning a car possible, with such high automobile rates in India.
  • Good calculation on interest rates, EMI and other charges on car loan will save you a hand full of bucks.
  • There are separate interest rates and other charges for pre-owned car loans.

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