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Car Loan

Car Loan Details

Last Updated 17th Oct 2021

A car loan is the perfect financial instrument to fulfil the dream of owning a car. Before applying, use the Car Loan EMI Calculator to know about the EMI. This will also help you in managing your budget and avoid any extra financial burden.

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Best Car Loan Providers in India

Bank Car Loan Interest Rates Maximum Loan Tenure Maximum Loan Amount
HDFC Bank Car Loan Rates 13.75% Fixed 7 years 100% of ex-showroom price
SBI Car Loan Rates 7.25% Floating 7 years 85% of on-road price
ICICI Bank Car Loan Rates 7.90% Fixed 7 years 100% of ex-showroom price
Axis Bank Car Loan Rates 7.45% Fixed 7 years 100% of on-road price
IndusInd Bank Car Loan Rates 8.00% Fixed 5 years 85% of ex-showroom price
Kotak Bank 6.50% Fixed 5 years 90% of ex-showroom price
PNB 6.90% Floating 7 years 85% of on-road price
Union Bank of India 7.25% Floating 7 years 85% of on-road price
Central Bank of India 7.25% Floating 7 years 90% of on-road price
Andhra Bank 7.40% Fixed 7 years 85% of on-road price
IDBI Bank 7.35% Fixed 7 years 90% of ex-showroom price

Car Loan Finance

Buying a car is one of the significant purchases that people make, second only to purchasing a home. There was a time when owning a car was a luxury and thus could be afforded by a few rich. However, car loans changed the scenario and now you can easily afford car with easy EMIs. Whether you are planning to buy a new car or an old car, you can finance it by taking a car loan at affordable rates. The rates for a car loan varies as per the value of car, the loan amount and repayment capability. You may get upto 100% of the ex-showroom price of the car.

Features Of Car Loan

A car loan has the following features and benefits.

Loan Tenure

The tenure of a car loan for a new car is usually longer than the used car, and it ranges between 5 years to 7 years.

Collateral Required

A car loan is secured against the car itself. Thus, there is no need to mortgage any other asset to procure a loan.

Loan Amount

The amount for a car loan depends upon the value of the car and the EMI you can pay and can range between 85% to 100% of the ex-showroom price.

Down Payment

Banks offer car loans at an on-road price or ex-showroom price. You may get a loan either at 80% of the on-road price or 100% of the ex-showroom price. Thus, the down payment for a car loan may be negligible.

Interest Rates

You can get car loans at both fixed and floating rate of interest. Currently, the car loan interest rate ranges between 6.50% to 20.00%.

Eligibility Criteria for Car Loan

The eligibility criteria to avail a car loan may vary from lender to lender. The common criteria to avail a car loan is mentioned below:

  • Age: The age limit to get a car loan is between 18 years to 65 years. However, many banks require a minimum age of 23 years.
  • Income: To avail a car loan, you need a monthly income of ₹ 10,000 per month.
  • Profession: Both salaried individuals and self employed professionals can avail a car loan. The interest rates are lower for salaried applicants.
  • Credit Score: A credit score of 700 or above is considered an ideal score for availing a car loan . However, some banks give car loans at a credit score of 650 and above.
  • Work Experience: The minimum work experience required to apply for a car loan varies for salaried and self-employed professionals. Salaried individuals should have a minimum experience of 1 year, and self-employed professionals should have business existence of minimum 5 years to avail a car loan.

Documents Required for Car Loan

Here is a list of essential common documents that are required by lenders to process your application for a car loan.

  • Identity Proof: PAN card, Passport, Driving License, Aadhaar Card, Voter ID, Government-issued i-card.
  • Address Proof: Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ bank statement (not more than 3 months old).
  • Income Proof: Form 16, last 3 months salary slip, last 3 months' bank account statement showing salary credit.
  • Age Proof: PAN card, Passport, Driving License, Voter id card, Birth certificate, Employee ID card (only for PSU/ Government employees), School/ college leaving certificate.
  • Quotation of the cost of the car selected from the dealer.

Do’s and Don’ts while taking Car Loan

To get the best and lowest car loan interest rates online, read the do’s and don’ts mentioned below.

Do’s Don’ts
  • Check the best discount and offers – Always check current offers and car loan interest rates offered to employees of large reputed companies
  • Do not apply for a loan amount more than what you are eligible for – Applying for an amount higher than your eligibility may lead to rejection of your loan application
  • Compare car loan rates based on loan amount – Some banks offer the lowest interest rate car loans for high loan amount
  • Do not apply with multiple banks – Simultaneous loan applications get recorded in your CIBIL report and can hurt your chances of getting a loan
  • Discount for tenures – Banks may offer lower rates on car loan for certain tenure
  • Your salary bank may not offer the cheapest loan – Various banks keep offering attractive schemes to acquire premium customers. Hence, salary bank may not be the best option

Key Points to remember before applying for a Car Loan

The best way to arrange funds while planning to purchase a new or old car is a pre-approved loan. A Pre-approved Loan is a credit that banks offer to their customers who have a clean credit history. These loans generally allow the customer to get credit with minimum documentation. Below mentioned are the important things for smooth and quick car loan approval

  • Credit Report:You must regularly check your credit report for CIBIL scores. A 750+ score will help you in getting lower interest rates. Lower the score, higher the interest rates offered, or the application is rejected.
  • On-time Bill Payment:To get a car loan, you must have a minimum monthly pre-tax income and a reasonable debt-to-income ratio. Increasing income takes time; hence, applicants can take steps to improve their debt-to-income ratio. Alwayspay bills on time to improve the debt-to-income ratio.
  • Shop for Different Loan Products:Loan market offers multiple options for buying new or old cars. Before finalising, compare car loan interest rates offered by banks and NBFCs as per the requirement.
  • Borrow as Less as Possible:Try to make the down payment A sizable down payment will decrease the loan amount, which will ensure less burden and hence, you pay less interest, low EMIs, short loan term.
  • Select a Plan That Fits the Budget:Applicant’s repayment capability also determines the loan approval chances. While planning to get a car loan, borrowers must ensure that they can afford the extra burden of EMIs on their monthly income. Further, A car loan with low EMIs and long term is not a good option if you can afford higher EMIs; Applicants must choose a scheme that offers low-interest rates and shortest duration possible.
  • Option to Get a Car Insurance with Complete Coverage:The banks and NBFCs are primarily worried about losses they may face when providing a loan. For certain companies, full coverage insurance is a prerequisite before a car loan is sanctioned as this allows them to reclaim the balance debt when the borrower is at fault in an accident.

Foreclosing a Car Loan

You have to repay the car loan amount in easy EMIs till the end. However, if you decide to pay the outstanding dues at once, that means you are foreclosing the loan which is better and different from settling. Lenders may or may not charge the foreclosure fees.The prepayment charges may be NIl or up to 5.21% for car loan prepayment or foreclosure.

Top-Up Loan on Your Car Loan

After availing of the car loan, you may come across emergencies such as marriage, medical issues, etc. To address this issue, you can ask for a top-up on the existing car loan. Lenders offer 150% of the car's value as a top-up amount. You must have a clean repayment history to avail Top-Up loan. HDFC, Axis, ICICI Bank are some of the primary lenders offering top-up on car loan services.

Refinancing Car Loan

The term refinancing a car means replacing the existing car loan with a new car loan from a different lender. You can take a refinancing car loan to avail the following benefits.

  • Reduced interest rates: You can repay the existing car loan and get a new car loan from a different lender if the interest rates for a car loan is lower for another lender. However, before opting for a car loan with a new lender ensure that the prepayment charges/fees do not exceed the overall reduction in interest rates.
  • Modifying the loan tenure: You can take a refinancing car loan if you want to increase/decrease the tenure of your loan. The tenure of a car loan is inversely proportional to loan EMI, which means that you have to pay less EMI in case of longer car tenure and vice versa.
  • Other modifications: It is likely that you come across better car loan offers in terms of late fees, hypothecation, insurance, application charges, etc. and thus you may choose to take a refinancing car loan to avail better features.

Income Tax Benefits on Car Loans for Electric Vehicles

In the latest union budget, the government made below mentioned provisions to stimulate environmentally friendly vehicles

  • You can enjoy a tax exemption of ₹ 1.50 Lakh on the interest if you take a car loan to buy an electric vehicle(EV).
  • In case of purchase of an electric vehicle(EV), you can avail a benefit of about ₹ 2.50 Lakh during the entire loan tenure.
  • The government has also cut the tax rates from 12% to 5% on Electric Vehicles.

Latest news about services related to Driving License

  • Now avail services related to your license online

    The Ministry of Road, Transport and Highways announced that you can now avail all the essential services related to your driving license online. Below-mentioned is the other guidelines for issuing and renewing driving licenses.

  • Easy Registration Process
  • Under the new guidelines, the renewal of registration certificate can now be done 60 days in advance. Also, the limit for geting temporary registration has been changed from 1 month to 6 months.
  • Learners License
  • You can now obtain a driving license without visiting the RTO office.
  • Validity of Motar Vechicle Documents
  • As per the new guidelines, the validity of motar vechicle documents including RC, DL and permits have been extended till 30th September 2021.

FAQs

How can I apply for car loan?

You can apply for a car loan by any of the below-mentioned ways:

  • By visiting the bank branch and contacting a car loan agent
  • By applying online at any bank or NBFC’s website.

What is the minimum and maximum tenure of car loan?

Car loan are is generally taken for a short period of time, the longer the tenure the smaller the EMI. Generally, Usually, car loan tenure is between 5 years to 7 years. However, car loan tenure could largely depend upon your age as well. For instance, if you are in your late 50s, banks may prefer lending you car loans at a shorter tenure.

What are the charges for car loan?

Apart from the rate of interest, there are two types of charges being main fees charged by the best bank on car loans.

  • Car loan processing fee: This is charged when you apply for the loan. This fee is charged for processing a car loan. The processing fee charged on a car loan is up to ₹ 3,000 of the loan amount and could be reduced if you can bargain.
  • Car loan preclosure fee: This fee is charged when you close your loan before the completion of the loan tenure. Prepayment penalty charged may be charges are upto 5% of the outstanding loan amount.

Is CIBIL Score for car loan important?

Car loan CIBIL score is very important for car loan approval. A Good high CIBIL score indicates an excellent good repayment record and hence banks can offer you a higher loan amount at a low rate of interest for a car loan. On the other side, a low Bad CIBIL Score will result in either loan at a higher interest rate or rejection of the loan application. So, make all your payments on time and maintain your CIBIL in order to get the best car loan rates. To avail a car loan, you need a minimum cibil score of 700.

What is ex-showroom price and on Road price?

Let's understand what is ex showroom price and on road price:-

  • Ex-showroom price is the price of the car including excise duty but excluding local duties and statutory charges.
  • On road price is the price you pay for the car including the ex-showroom price and cost of registration, insurance, octroi, municipal entry tax, road tax and any accessories. The On-road On road price tends to be 15-25% more than the ex-showroom price and may vary from city to city.

Can I apply for a car loan jointly with my spouse?

Yes, you can apply for a car loan jointly with a co-applicant (either be your spouse or your parents). This helps you to increase your eligibility. Hence you may get a higher loan amount as your co-applicant’s income also gets added to your income. In co-applicant cases, the total income is taken into consideration for calculating the eligibility for a car loan.

Does it affect my co-applicant if I default in on a car loan?

Yes, if you fail to pay the loan on time then it will also affect your co-applicant. Default in the loan will affect his/her CIBIL rating as well. A co-applicant is equal owner of the loan, and is equally responsible for payment of the loan.

Can I do balance transfer on car loan?

Yes, banks provide the option of car loan balance transfer. You should opt for the transfer of your loan in case the interest rate charged by your bank is higher than that of another bank. Balance transfer must be based on cost-benefit analysis and you should proceed with the transfer of a car loan only when the benefits due to transfer are greater than the processing fee of the balance transfer and related cost.

Can I get top up on a car loan?

A Top-up loan is an additional loan that is offered over and above the existing loan amount. Yes, you can get a car loan top up but terms and conditions vary from bank to bank.

What should I do if my car loan application gets rejected by the bank?

Low CIBIL score and low salary are the main reasons for the car loan application getting rejected by the banks. Below mentioned are the ways to increase the chances of your car loan getting approved when banks are rejecting your loan application:

  • In this case, if If you have a spouse who is also working, you can add him/her as a co-applicant to boost the combined salary levels.
  • Clear your old debts first so that your leverage credit levels come down.
  • Balance transfer of your existing loans so that the rate of interest on loans can come down and an additional loan can be availed.

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Car Loan News - Oct 2021
  • 2021-10-13 : Union Bank of India Revises Car Loan Interest Rates
    Union Bank of India has revised car loan rates for new cars. The new 4 wheeler rates now stand at 7.25%.
  • 2021-10-08 : SBI Revises Car Loan Rates
    State Bank of India has revised car loan rates by 25 points to 7.25%. Earlier, the car loan started at 7.50%
  • 2021-10-07 : IDBI Bank Introduces Special Festive Offer
    IDBI Bank has introduced a special festive offer called ‘i_zoomdrive’. The scheme allows quick processing, competitive interest rates, prepayment charges are waived off and 100% financing for certain segments. These offers are available on auto loans, education loans and home loans.
  • 2021-10-05 : IndusInd Bank Advances Grow by 10% Y-O-Y
    IndusInd Bank has posted a growth in advances by 10% on a Y-O-Y basis. Retail Deposits and Deposits from Small Business Customers amounted to Rs 1,11,749 crore as of 30 September 2021 as compared to Rs 1,05,737 crore as of 30 June 2021.
  • 2021-10-05 : HDFC Bank Reports Growth in Advances in Q2
    HDFC Bank has reported a growth in advances by 15.4% in quarter 2. As a result, the advances have grown to ₹ 11.98 lakh crore as of September 30, 2021, from ₹ 10.38 lakh crore a year ago.
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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