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Car Loan Interest Rates

Car Loan Interest Rates

Last Updated 29th Jul 2021

Interest Rate 8.65%
Processing Fee Min 0.20% of loan amount
Loan Tenure 3 years to 7 years
Prepayment charges NIL to 5%
Loan to Value Upto 100% of ex-showroom price
  • Maximum loan amount depends upon either on road price or ex-showroom price of the car
  • Popular Banks offering car loan are HDFC Bank, Axis Bank, ICICI Bank, SBI and PNB
  • Car loan interest rate is based on factors such as loan amount, occupation, employment type and cibil score. Higher the loan amount, lower will be the interest rate.
Apply for Car Loan @ 8.65%*

Compare Car Loan Interest Rate for All Banks

Bank Car Loan Interest Rates Lowest EMI per lakh for Max TenureMaximum Loan Amount
HDFC Bank Car Loan Rates
Compare
13.75% Fixed ₹ 1,860 for 7 years 100% of ex-showroom price
SBI Car Loan Rates
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7.50% Floating ₹ 1,534 for 7 years 85% of on-road price
ICICI Bank Car Loan Rates
Compare
7.90% Fixed ₹ 1,554 for 7 years 100% of ex-showroom price
Axis Bank
Compare
8.65% Fixed ₹ 1,591 for 7 years 100% of on-road price
IndusInd Bank
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8.00% Fixed ₹ 2,028 for 5 years 85% of ex-showroom price
Kotak Bank
Compare
6.50% Fixed ₹ 1,957 for 5 years 90% of ex-showroom price
PNB
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7.55% Floating ₹ 1,536 for 7 years 85% of on-road price
Union Bank of India
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7.40% Floating ₹ 1,529 for 7 years 85% of on-road price
Central Bank of India
Compare
7.25% Floating ₹ 1,522 for 7 years 90% of on-road price
Andhra Bank
Compare
7.40% Fixed ₹ 1,529 for 7 years 85% of on-road price
IDBI Bank
Compare
7.50% Fixed ₹ 1,534 for 7 years 90% of ex-showroom price

Lowest Car Loan Rates

As per the current rates, Kotak Bank offers car loans at a lowest rate of 6.50 %. The rates at which you get a car loan depends on various factors such as loan amount, net monthly income, work experience, and CIBIL score. Typically banks charge a lower car loan rate for higher loan amount and for employees working with reputed organisations. Other banks which provide lowest car loan rates are Bank of Baroda, Central Bank of India and Bank of India.

List of banks that provide car loans ranging from 6.50% to 7.50% are as follows:

Bank NameInterest RateLoan Amount
Kotak Bank 6.50% - 20.00% 90% of ex-showroom price
Bank of Baroda 7.25% - 10.25% 90% of on-road price
Central Bank of India 7.25% - 7.70% 90% of on-road price
Bank of India 7.35% - 8.55% 85% of on-road price
Corporation Bank 7.40% - 7.50% 85% of ex-showroom price

Car Loan - Fee and Charges

  • Processing fees – Most banks charge processing fees of ₹ 250 to up to ₹ 20,000. To get the lowest fee, compare the fees of all banks as you apply for car loan through MyLoanCare.
  • Insurance premium – It is mandatory to take a car insurance policy to cover any damages to the car in case of an accident. However, the coverage and premium of various insurance policies can be different from each other. The insurance policy bundled with your car purchase might not necessarily be the best insurance policy. Hence, it is advisable to compare the insurance terms, before choosing an insurance policy for your car.
  • Prepayment and foreclosure – When you want to repay a partial amount of loan before time, it is called part prepayment. In case you decide to pay the entire loan amount before time, it is called foreclosure. Car loans at a floating rate of interest do not come with any prepayment charge; however, banks may charge a prepayment penalty ranging from Nil to upto 5% of the loan amount in case of a fixed rate of interest. So, check carefully if the low interest rate car loan you get comes with high prepayment or foreclosure charges. Note that some loans cannot be repaid before time.
  • Down payment – Banks offer car loans either at 80% of on-road price or 100% of ex-showroom price. However, 80% on-road is almost equivalent to 95% of ex-showroom price. You are advised to fund maximum down payment as it reduces your burden of high monthly payments.

Car Loan Interest Calculation and Formula

You can calculate the car loan interest using the mathematical formula as mentioned below:

  • Flat Rate Method: Interest is calculated on the entire principal amount throughout the loan tenure.
    EMI = (Principal + total interest payable) / loan tenor in month
    Where Total Interest Payable = Principal x Interest Rate x Loan Tenure/100)
  • Reducing Balance Method: Interest is calculated on the outstanding loan amount
    EMI= [P x R x (1+R)^N]/[(1+R)^ (N-1)]
    Where P = Principal Amount
    R = Rate of Interest
    N = Loan Tenure in months

The functioning of the above-mentioned methods can be understood with the help of the following table:

ParametersFlat Rate MethodReducing Balance Method
Loan Amount ₹ 1,00,000₹ 1,00,000
Tenure60 Months 60 Months
Rate Of Interest10%10%
Monthly EMI₹ 2,500₹ 2,198
Total Interest Payout₹ 1,50,000₹ 1,31,900
Savings-₹ 18,100

Factors that affect Car Loan Interest Rate

There are a number of factors that affect car loan interest rates. These are listed below:

  • Credit score : A credit score of 700 and above is considered a good CIBIL score to avail car loan. In case of a relatively low credit score, you may either get a car loan at a high rate of interest or your application for a car loan may get rejected.
  • Income : Income is another factor that ensures the lender of your loan repayment ability. Thus, the higher the income, the lower would be the car loan interest rate.
  • Occupation : The rate of interest varies for both salaried and self-employed borrowers. Banks generally have a high rate of interest for self-employed professionals as compared to salaried individuals.
  • Existing relationship with the bank : In case you are an old customer of the lender via a savings or investment account, then it is likely that you will be offered a lower interest rate from that bank.
  • Your organization’s reputation : The reputation of the organization you are currently working for plays an important role in helping you grab a car loan at a lower interest rate.

How to get Best Interest Rate Car Loan?

To get the best interest rate car loan you must follow the tips as mentioned below:

  • Check the best discount and offers : Always check current offers and cheapest car loan interest rates offered to employees of large reputed companies.
  • Compare car loan rates based on loan amount : Some banks offer the lowest interest rate for car loans for high loan amounts. Loan amount can vary by the value of the car used for calculating LTV.
  • 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.
  • Do not apply with multiple banks : Simultaneous loan applications get recorded in your CIBIL report and can hurt your chances of getting a loan.
  • Carefully decide on which type of insurance would be necessary : Check and compare the cost, coverage and claim settlement ratio of car insurance. You must avail of comprehensive, third Party, or zero dep insurance.

Car Loan Repayment Scheme

You can choose to repay the EMI of your car using any of the repayment schemes:

  • EMI in arrears scheme – This is a standard method of paying EMI where the interest for a month and principal repayment is payable at or after the end of the month.
  • Advance EMI scheme – Under this scheme, you pay interest and EMI at the beginning of the month. So, each month, you pay interest on the amount that you have already repaid to the bank at the beginning of the month. In case your bank charges EMI in advance, the EMI amount should be about 1% lower than that in case of EMI in arrears. For instance, , EMI per ₹ 1 Lakh loan amount on a 5 year car loan at 10% rate of interest as per EMI in arrears method comes to ₹ 2,125 while that as per EMI in advance method comes to ₹ 2,107.
  • Zero interest scheme (also called 0% finance scheme) – This is one of those free lunches schemes that actually doesn’t exist. So, beware of schemes that claim to offer zero interest. It is likely that the car company is offering a subsidy scheme whereby the interest is paid by it to the bank upfront. Now, you could always ask the car dealer for the same amount as a cash discount. It’s like padding up the price of the car for the interest amount and marketing it under a nice name.

Car Loan Balance Transfer Rates

In case you are paying higher interest to your current lender, you can switch to another lender to pay your outstanding balance of car loan by availing of the car loan balance transfer facility starting at 6.50%. As per the current rates, Kotak Bank,Bank of Baroda and Central Bank of India offer lowest rates for balance transfer.

FAQs

What are the extra charges on Car Loan?

Apart from rate of interest, there are two types of charges being charged by the banks.

  • Car loan processing fee: This is charged when you apply for the loan. Banks charge processing fees of ₹ 3,300 of the loan amount and could be reduced depending upon your eligibility and profile.
  • Car loan pre-closure fee: This is charged when you close your loan before the completion of loan tenure. Prepayment penalty charges range from nil to 5% of the outstanding amount. However, car loans at floating rate of interest do not come with any prepayment charges.

What are the main factors that affect car loan interest rate?

Interest on car loans depends on factors like down payment, loan tenure, credit report and your net income. High income with good CIBIL and maximum down payment can lend you a loan at low interest rate. The interest rates on a car loan, may vary from one lender to another.

What is a good interest rate for a car loan?

The good interest rate for a car loan is the interest rate which is lower than the average car loan interest rate. Presently, the average rate for a new & used car loan is 4.12% and 8.70% and may vary across all car loan lenders.

What is the current Car Loan rate of interest?

The present car Loan interest rates range between 6.50% to 20.00%. Currently, Kotak Bank offers the lowest car loan rate of 6.50%. Other banks offering lowest car loan rates are Bank of Baroda, Central Bank of India and Bank of India.

Which bank gives the lowest interest rate for Car Loan?

As per the latest rates,Kotak Bank provides lowest car loan starting at 6.50%. Kotak Bank offers car loan up to 90% of the pricing of the car with a processing fee of ₹ 3,300.

Can I get the lowest interest Car Loan even if my credit score is bad?

It is difficult to get a car loan at the lowest Interest rate if your credit score is bad. However, you can bring a co-applicant to get a car loan. However, note that the co-applicant must have a good cibil score with a stable source of income, failure to repay the car loan may impact both applicants severely.

Can banks change the interest rate during the loan tenure for a Car Loan?

Yes, if you have availed the car loan at a floating rate of interest, banks can change the interest rate with a change in external benchmarking such as MCLR Rate. In case of fixed rate, the rate of a car loan remains the same.


Car Loan Reviews 4.3/5  by 29 customers
MyLoanCare Service
4.4/5.0
Banks Service
4.3/5.0
Sellamuthu P, Namakkal
Reviewed on 08th Sep 2018
4 / 5 stars
HDFC Bank Car Loan Availed in Aug 2018

Fast processing, easy documents collection, interest rate is reasonable, repayment options need to iRead more...

Nimish Goswami,
Reviewed on 19th Jul 2018
5 / 5 stars
HDFC Bank Car Loan Availed in Jul 2018

Mr. Sudhir Kumar helped so much and has great knowledge about market.Read more...

Sinto Jacob, Trichur
Reviewed on 23rd May 2018
5 / 5 stars
HDFC Bank Car Loan Availed in May 2018

applied car loan through myloancare. it was fast processing and got the amount without any delayRead more...

Shiv Machaiah, Bangalore
Reviewed on 16th Mar 2018
5 / 5 stars
Axis Bank Car Loan Availed in Jan 2017

My Loan Care person was quite helpful and gave information in detail. Read more...

Arnav, Ghaziabad
Reviewed on 07th Jan 2018
4 / 5 stars
SBI Car Loan Availed in Dec-18

I got fast processing on my application. All charges were normalRead more...

Krishna Yadav, Guwahati
Reviewed on 30th Nov 2017
3 / 5 stars
ICICI Bank Car Loan Availed in Oct-18

Got over 9% interest which was okay. There was a delay in disbursalRead more...

Mohamed Yunus, Pondicherry
Reviewed on 22nd Nov 2017
5 / 5 stars
HDFC Bank Car Loan Availed in Nov 2017

Good and fast service, door step documents collection.Read more...

jagmal singh makwana, Banswara
Reviewed on 02nd Nov 2017
5 / 5 stars
HDFC Bank Car Loan Availed in Oct-17

HDFC Bank finance is good. I like good service and fast processing.Read more...

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Car Loan News - Jul 2021
  • 2021-07-16 : Amalgamation of Bank of Baroda, erstwhile Vijaya Bank and erstwhile Dena Bank
    Bank of Baroda, on its website, stated that the IFSC codes of the erstwhile Vijaya Bank and Dena Bank were discontinued on March 1, 2021. Customers have been asked to apply for cheque books with the new MICR code at the earliest.
  • 2021-07-16 : UBI update on change in IFSC code for merged banks - Andhra Bank and Corporation Bank
    Union Bank of India (UBI) on Friday said the IFSC codes of the erstwhile e-Andhra Bank and e-Corporation Bank branches will change with effect from July 1, 2021. Customers of the erstwhile banks will have to get new cheque books with changed IFSC and MICR codes
  • 2021-07-16 : Bandhan Bank total loans rise 8% to ₹80,128 crore in Q1, deposits up 28%
    Bandhan Bank witnessed an 8% rise in its loans and advances to ₹80,128 crores in the June quarter this fiscal. The loans and advances during the same period of 2020 stood at ₹74,331 crore. Compared sequentially, it was down by 8% from ₹87,043 crores in the March quarter. Total deposits grew by 28% year-on-year to ₹77,336 crores, while the CASA (current account and savings account) deposits jumped by 48% to ₹33,197 crores in the first quarter of 2021-22.
  • 2021-07-15 : Indian Bank merger with Allahabad Bank - Change in IFSC
    The Indian Bank, which has merged with the Allahabad Bank, carried out a software migration over the weekend. As the merger got completed, new rules had been issued by the bank with regard to its services. Existing customers were asked on July 1 to get a new IFSC code to carry out online transactions smoothly.
  • 2021-07-15 : OBC & UBI merged with PNB
    After the merger of OBC and UBI with PNB in April 2020, PNB has now updated the IFSC codes of all the branches of PNB and UBI. New IFSC codes have come into effect from July 1, 2021.
*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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