Prices starting at just ₹2,094*
Buy or Renew Insurance in 60 Seconds ⚡️
Looking to insure brand new car?
Zero commissions, big savings
Home / Car Loan
Buying a car has become more accessible thanks to car loans with attractive interest rates, flexible tenure and easy EMIs. You can also get up to 100% of the on-road price as the loan amount, depending on the lender/bank. In this article, we bring you all the information about the lowest car loan interest rates, eligibility criteria and the documents you need to get a car loan without any hassle.
The following table lists the car loan interest rates (as of July 2023) of various banks in India.
Car Loan Interest Rate (Per Annum)
State Bank of India
Bank of Baroda
Union Bank of India
8.85% onwards (Rack Interest)
Punjab National Bank
Kotak Mahindra Bank
Bank of India
The eligibility criteria for availing a car loan differs from one bank to another. However, here are the common criteria to be eligible for a car loan.
The person's age should fall within the range of 18 to 75 years.
A minimum monthly income of Rs. 20,000 is required.
At least one year of employment with the present employer is necessary.
The individual must be either a salaried employee or self-employed, working for either a government institution or a private company.
Here are the documents required to get a car loan.
Identity proof (Aadhaar Card, Driving Licence, Voter ID, PAN Card, Passport)
Address proof (Ration Card, Utility Bills, Asdhaard Card, Driving Licence, etc.)
Income proof (Bank statements, salary slips, Form 16, income tax returns if you are salaried)
Note that the list of documents may vary depending on one bank to another.
EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]
EMI = Equated Monthly Installment
P = Principal loan amount (car loan amount)
R = Monthly interest rate (annual interest rate divided by 12)
N = Loan tenure in months
Determine the principal loan amount: This is the amount you plan to borrow to purchase the car.
Research and decide on the interest rate: Check with various lenders to obtain the applicable interest rate for your car loan. Ensure you use the monthly interest rate in the calculation (divide the annual interest rate by 12).
Determine the loan tenure: Decide on the loan tenure or the number of months over which you plan to repay the loan.
Convert the interest rate to decimal: Divide the annual interest rate by 100 to convert it to decimal form.
Use the formula mentioned above: Plug in the values of P, R, and N into the formula to calculate the EMI.
Alternatively, you can make use of the car loan calculator tools available on the internet to calculate the EMI for your car loan amount.
Here are some tips for choosing the right car loan.
Before starting the loan selection process, assess your financial situation and determine how much you can afford to borrow and repay comfortably.
Look for various lenders, including banks, non-banking financial companies (NBFCs), and other financial institutions. Compare their interest rates, loan terms, processing fees, and other charges.
Understand the eligibility requirements set by different lenders. This includes factors such as age, income, employment stability, credit score, and documentation.
Compare the interest rates offered by different lenders. A lower interest rate can significantly reduce your overall loan cost. Also, consider whether the rate is fixed or variable and the impact it may have on your monthly repayments.
Evaluate the loan tenure options available. Longer tenures may result in lower monthly payments but can increase the total interest paid over the loan term. Choose a tenure that aligns with your financial goals and repayment capacity.
Look out for any additional charges or hidden fees associated with the loan, such as processing fees, prepayment penalties, late payment charges, or documentation charges. Consider these costs along with the interest rate to make an informed decision.
Carefully read the loan agreement, including all terms and conditions, before signing any documents. Understand the repayment schedule, prepayment options, foreclosure terms, and any other clauses that may impact your loan.
If you are uncertain or unfamiliar with the loan selection process, consider consulting a financial advisor or expert who can provide guidance based on your specific needs and circumstances.
By following these steps and conducting thorough research, you can choose the right car loan that suits your requirements and helps you finance your vehicle purchase effectively.
A used car loan is a financial product specifically designed to assist individuals in purchasing pre-owned vehicles. Whether it's a sedan, SUV, or hatchback, a used car loan provides borrowers with the necessary funds to buy a used car of their choice.
This type of loan offers flexibility and convenience to those who prefer buying a second-hand vehicle rather than a brand-new one.Second-hand car loans typically have specific eligibility criteria that borrowers need to meet. These criteria may include factors such as the age of the car, the borrower's income, employment stability, credit score, and documentation.
The loan amount for a used car loan is based on factors such as the valuation of the car and the borrower's repayment capacity.Lenders in India offer competitive used car loan interest rates, making them an attractive option for individuals looking to own a pre-owned vehicle.
The loan tenure for used car loans is usually shorter compared to new car loans, ranging from 1 to 7 years, depending on the lender's terms and the age of the car. Borrowers can choose a loan tenure that suits their financial situation and repayment capacity, and the loan is repaid in Equated Monthly Installments (EMIs). With the availability of used car loans, individuals can fulfil their desire to own a car without straining their finances or exhausting their savings.
Here are some tips to get a faster car loan approval.
A higher credit score increases your chances of quick loan approval. Pay your bills and existing loans on time, avoid defaulting on payments, and keep your credit utilisation ratio low to maintain a good credit score.
Research and select a lender known for its quick loan processing and approval. Compare the turnaround times of different lenders and choose one that offers a streamlined and efficient loan application process.
Ensure you have all the necessary documents required by the lender for car loan approval. It may include income proof, identity proof, address proof, bank statements, employment details, and KYC documents. Submitting accurate and complete documents will speed up the approval process.
Applying for a loan that matches your financial profile and eligibility increases the likelihood of quick approval. Lenders may have specific criteria regarding minimum income, employment stability, age, and other factors. Applying for a loan within your eligibility range avoids unnecessary delays or rejections.
Some lenders offer pre-approved car loans based on your creditworthiness and financial history. These pre-approved loans have a faster approval process as the initial assessment has already been done. Check with your preferred lender if you qualify for any pre-approved loan offers.
Making a higher down payment reduces the loan amount, which can expedite the approval process. It also demonstrates your commitment towards the purchase and lowers the risk for the lender, making them more likely to approve the loan faster.
Lenders/banks prefer car loan applications from individuals with a stable employment history as it indicates a steady source of income. If you have been working with the same employer for a considerable period, it can enhance your chances of faster loan approval.
Many lenders now provide the option to apply for car loans online. Online applications are often processed faster compared to physical applications. Ensure you fill out the application accurately and provide all the required details to avoid any delays in processing.
Here are the key advantages of a car loan.
A car loan allows you to purchase a car without having to pay the entire amount upfront. It provides you with the convenience of owning a vehicle while spreading the cost over a period of time. The best part, you can also get a used car loan if you wish to purchase a second-hand car.
Car loans in India offer flexible repayment options, allowing you to choose a tenure that suits your financial situation. You can opt for shorter or longer loan tenures based on your preference and repayment capacity.
By spreading the cost of the car over the loan tenure, you can manage your monthly budget more effectively. Car loan repayments can be structured in a way that aligns with your income and other financial commitments.
Instead of depleting your savings to purchase a car, a car loan allows you to preserve your savings for emergencies, investments, or other financial goals. You can retain your liquidity while still being able to own a vehicle.
Taking a car loan and making timely EMI payments can help you build a positive credit history. It can be beneficial for future loan applications, as a good credit history enhances your creditworthiness and increases the chances of loan approval.
Car loan interest rates in India can be competitive, especially if you have a good credit score. Shopping around and comparing offers from different lenders can help you find the most favourable interest rate for your car loan.
In certain cases, car loan borrowers in India may be eligible for tax benefits. For example, if the car is used for business purposes, you may be able to claim deductions on the interest paid on the loan. It is advisable to consult with a tax advisor or financial expert to understand the specific tax benefits applicable to your situation.
Once you complete the loan repayment, you become the sole owner of the car. Unlike leasing or renting, a car loan allows you to have full ownership and enjoy the benefits of the vehicle.
Car loan foreclosure refers to the early repayment or complete settlement of a car loan before the scheduled loan tenure. It means paying off the remaining outstanding loan amount in full, including any applicable charges, before the agreed-upon loan term ends. When a borrower chooses to foreclose a car loan, they essentially clear their debt to the lender ahead of the original repayment schedule. It can be done by making a lump sum payment or by paying off the outstanding balance in instalments. Foreclosing a car loan offers several advantages, including the following.
By repaying the loan early, borrowers can save on the interest that would have accrued over the remaining loan tenure. It can lead to significant cost savings, particularly if the loan has a high-interest rate or a long repayment period.
Clearing a car loan through foreclosure demonstrates financial discipline and responsibility. It can have a positive impact on the borrower's credit history and credit score, making it easier to obtain future loans at favourable terms.
With the car loan fully repaid, borrowers have greater financial freedom and flexibility. They can allocate the previously allocated loan payments towards other financial goals or expenses.
It's important to note that car loan foreclosure may attract certain charges or penalties imposed by the lender.
These charges, often referred to as foreclosure charges or prepayment penalties, vary between lenders and loan agreements.
It is crucial to carefully review the loan terms and conditions to understand any applicable charges before proceeding with the foreclosure.
It is advisable to evaluate your financial situation and calculate the potential savings from foreclosure before deciding to foreclose on a car loan.
Consulting with the lender and seeking professional advice can help in understanding the specific terms and implications of car loan foreclosure in India.
Car refinancing refers to the process of replacing the current car loan with a new loan from a different lender. It involves paying off the outstanding balance of the current car loan by taking out a new loan, usually with more favourable terms such as a lower interest rate, extended loan tenure, or modified repayment terms. Here are some key points to understand about car refinancing.
The primary purpose of car refinancing is to obtain better loan terms that can help borrowers save money or improve their financial situation. Refinancing allows borrowers to take advantage of lower interest rates, reduce monthly payments, or adjust repayment terms based on their current financial needs.
One of the main reasons for car refinancing is to secure a loan with a lower interest rate than the original loan. It can result in significant interest savings over the course of the loan.
Refinancing also provides the opportunity to extend the loan tenure, which can result in lower monthly payments. However, it's important to consider the overall cost of the loan over the extended period, as it may result in paying more interest in the long run.
If a borrower's financial situation has improved since taking out the original car loan, refinancing can help negotiate better terms. For example, if the borrower's credit score has improved, they may qualify for a lower interest rate or more favourable loan terms.
Refinancing involves moving the car loan from the current lender to a new lender. It allows borrowers to explore different lending options and select a lender that offers more competitive terms or better customer service.
Similar to the process of applying for a new car loan, refinancing requires providing necessary documentation and may involve certain charges such as processing fees or prepayment penalties. It is important to carefully review the terms and conditions of the new loan agreement before proceeding with refinancing.
Certain banks/lenders provide loans for the on-road price of the car.
Yes, many banks and financial institutions in India offer used car loans. The loan amount and eligibility criteria for used car loans may differ slightly from new car loans. Borrowers can avail of financing for pre-owned cars that meet the lender's age and condition requirements.
Yes, borrowers can prepay or foreclose their car loan before the end of the tenure.
All types of cars, such as hatchbacks, sedans, SUVs (Sporty Utility Vehicles), MPVs (Multi-Purpose Vehicles), commercial vehicles, etc., are eligible for car loans in India.
Whether or not a guarantor is required for a car loan in India depends on various factors, including the borrower's financial profile and the lending institution's policies. In many cases, a guarantor is not mandatory for a car loan, especially if the borrower meets the lender's eligibility criteria and has a good credit score.
The specific credit score required to apply for a car loan in India can vary between lenders. Generally, a higher credit score improves your chances of getting approved for a car loan and may also help you secure more favourable loan terms, such as a lower interest rate.
While different lenders may have their own criteria, having a credit score of around 750 or above is generally considered good for car loan applications. However, it's important to note that credit score requirements can differ based on the lender's policies, the loan amount, and other factors.
Compare all the available options before applying for a car loan. Once you analyse the benefits of various lenders, choose a bank/lender that best suits your requirements.
The down payment depends on the car’s price. However, if you make a higher down payment, the loan amount will be lower. The lower loan amount may result in lenders offering you a lower interest rate.
Have queries related to ACKO’s car insurance policies? Refer to our Policy Wordings for detailed information or reach out to us via email or phone using the information below
Write to us at [email protected]
Call us on 1800 266 2256