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Car Loan Interest Rate, Types, Influencing Factors, Prepayment and Foreclosure

Updated: Aug 30,2019 17:02 IST

Vikram Sharma

Car Loan Interest Rate is the rate of interest charged by the lending institution for the amount provided as car loan. Car Loan Interest Rate varies from bank to bank. More detailed information on Car Loan Interest Rate, rate of interest comparison with other banks and related details are given in this article.

Information on Car Loan Interest Rates

Car Loan Schemes provided by various banks and other financial institutions help the people to own a desired car and change a part of their life as a luxurious one. Since the loan amount can be repaid in monthly EMI payments, it is not a big burden to the people. Car loans come with  certain charges and interest rates which vary from bank to bank. Most of the banks provide easy procedure to obtain car loan and convenient rate of interests. The below table will give you updated details related to Car Loan Interest Rate and other charges related to Car Loans for most of the banks. 

Car Loan Interest Rate

9%-15%

Processing Charges

Upto Rs.10000(varies according to banks)

Late Payment Charges

Upto 2%

Loan Tenure

1-7 years

Pre-closure Charges

Varies with different banks

Prepayment Charges

0%-5%

How much is the Car Loan Interest Rate charged by Different Banks ?

Normally in India, each bank charge their own interest rates according to the base loan rates. The car loan interest rates are charges between 9%-15%. Banks provide two types of Car Loan Interest Rate. They are fixed rate and floating rate of interest. Car Loan Interest Rate with fixed rate of interest has the meaning in its own name. The rate of interest is fixed throughout the loan tenure. The EMI is fixed every month and does not change due to any market conditions. Whereas, Car Loan Interest Rate with floating rate of interest changes according to the decisions taken by the car loan lenders. The Car Loan Interest Rate changes according to the market fluctuations. Check the Car Loan Interest Rate of different banks and other financial institutions in the below table.
 

Banks or Other Financial Institutions

Car Loan Interest Rate

AXIS Bank

11%-12%

Bank of India

9.25%

Federal Bank

9.15%-9.45%

HDFC Bank

8%-13%

ICICI Bank

10.75%-15.50%

IDBI Bank

9.95%-12.05%

SBI

9.05%-12.6%

Syndicate Bank

9.10%

Sundaram Finance

8.75%

What are the Other Charges related to the Car Loan ?

Car Loan Interest Rate is the main charges which is associated with the car loan. All the charges related to the Car Loan vary from bank to bank. Apart from the Car Loan Interest Rate, the other charges which come along the car loan are processing charges, pre-closure or foreclosure charges, documentation charges and late payment charges. Some banks a charge named loan cancellation charge, if their customers even cancel their loans at the time of processing or at the later stage. Processing charges are levied by all the banks for verification and processing of the car loan. The process of application of car loan is involved with a meagre amount of charge levied as processing charge. It may be charged upto Rs.10000. Some money lenders waive and provide discounts on processing charges and financial institutions provide reduction in the rate of interest for car loan during festive periods.When a borrower pays back a partial amount or full loan amount before the due date, he/ she is charged with a prepayment or foreclosure charges. Prepayment means the part of loan is paid in advance before the tenure by the customer. Foreclosure is the completion of the car loan amount before the end of the tenure. Both the prepayment and foreclosure attract charges which is a certain percentage calculated on the amount being paid off. This charges varies from bank to bank. Some banks charge documentation charges. It is advisable to repay the car loan on time. To eliminate the delay in EMI payment, banks levy late payment charges.Most of the banks charge 2% on the loan amount for the month when a person has not paid the EMI amount. To avoid penalty charges, it is advisable to pay the EMI on time. Prepayment charges related to the car loan apart from the car loan interest rate of top two banks are given in the below table.
 

HDFC Bank

Prepayment charge









 
  • no prepayment is allowed for upto 12 months
  • 5% of loan amount for a period of 13-24 months
  • 3% of loan amount for a period above 24 months

ICICI Bank

Prepayment charge









 
  • no prepayment is allowed for upto 6 months
  • 6% of loan amount for a period of 7-12 months
  • 5% of loan amount for a period of 13-24 months
  • 3% of loan amount for a period above 24 months

 

What is the Car Loan Eligibility Criteria?

Car Loans are opted by majority of the people. Days have passed when the car was a luxury, but now it has turned out to be a necessity. Like other loans car loans doesn’t have much of strict eligibility criteria but few basic eligibility to avail a car loan.One should satisfy all the car loan eligibility criteria which is listed below.
  • The applicant for car loan must be draw a regular income in order to obtain the car loan.
  •  Applicant must be an Indian or an NRI holding Indian passport. 
  • The applicant must be of minimum 21 years of age and must not exceed 65 years. 
  • Proper salary certificates in case salaried people and bank records in case of self employed people must be submitted for availing the bank loan.
  • In the same business for one year or two years in the same business
  • Get a pay that can make minimum repayment every month

What is the Car Loan Interest Rate for Pre-owned Car Loans ?

Purchasing a used car or pre-owned car is common now. One should consider few aspects when purchasing a pre-owned car from a third party. It should be checked the car which is to be bought is not a stolen one. Also the condition of the used car must be good, otherwise it is not worth applying loan for a pre-owned car. The loan amount provided is always lesser for the pre-owned car than the new car. Also the car loan interest rate for pre-owned cars would at a rise due to the risks involved. The car loan interest rate of few banks for used or pre-owned car loans are provided in the below table.
 

Banks

Car loan interest rate

HDFC Bank

13% fixed

SBI Bank

12.6% floating

ICICI Bank

15.5% fixed

Kotak Bank

17% fixed

Union Bank of India

12% floating

How much Amount does Banks Provide as Car Loan?

The maximum amount approved by the banks vary from bank to bank. Mostly banks approve 80% to 90% of cars on road price. The fund provided by the banks depend on price and type of the car, also whether it is a new car or pre owned car. Rarely, some banks provide 100% of the car’s showroom price. In India, the young salaried people who apply for the car loan are in a rise. The car loan amount depends upon your repayment capacity and the monthly income. Since car is a depreciating asset, it is not advisable to take high amount as car loan. It would be feasible to repay the loans if the monthly EMI do not exceed 20% of your monthly income. It is wise to consider all the aspects before applying for the car loan.

Which are the Top Banks and other Financial Institutions that provide Car Loans ? 

The banks and financial institution are in a big number like how there is a high demand for purchasing of the cars through car loans. All the banks provide different schemes for car loans at varied rate of interest and charges. Few banks does not levy any extra charges to attract the borrowers. Consider and compare the car loan interest rate of all the banks before applying for car loan. Some of the top banks providing car loans are given as follows.
  • HDFC Bank
  • ICICI Bank
  • SBI
  • AXIS Bank
  • Magma Fincorp
  • Federal Bank

Is it possible to negotiate Car Loan Interest Rate ?

It is possible to negotiate the car loan interest rates. The applicant may have had repaid the earlier loans on time. The credit history reflecting correct payment may help the applicants to obtain the car loan easily and also at low rate of interest. Person with very good credit history, better income and repayment capacity can always try to negotiate for lower car loan interest rates. Auto refinancing is one of the option to reduce the car loan interest rates. One can new loans at lower rate of interest to pay off the old loans. This ultimately reduces the monthly EMI payment. Try to negotiate the car loan interest rate with the lender before submitting the documents. This would provide you a chance to re-consider the other bank if the car loan interest rates are not feasible.  There are always several choices to be made as many number of banks and financial institutions waive offers and festive discounts frequently. 

What are the Factors Influencing Car Loan Interest Rate ?

When the income level of the applicant for car loan is high, then possibly he/she will be able to repay the loan amount easily, thus the rate of interest would be low. The applicants’ earlier loan history and their creditworthiness is high, then the bank might charge low rate of interest. The other factors also influence the loan amount equally.
There are certain factors that have a greater influence over the car loan interest rate. The factors are listed below.
  • Loan amount
  • Income of the applicant
  • Tenure
  • Car model and age
  • Credit worthiness of the applicant

What are the Documents to be Submitted for Availing a Car Loan ?

Every loan that is being processed requires few documentation process and paperworks. 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 

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