In the millennial age owning a car is not a luxury, but a necessity. Not having a car of your own restricts you and your family from venturing to work easily, outing for leisure or maintaining a good social and professional life. Since many institutions offer vehicle loans, owning a car is no longer just a dream. Loans are easily available for new cars as well as used cars which enable you to buy your car and pay the borrowed amount through easy monthly EMIs.
Car Loan Interest Rates
Many individuals dream of owning a car because of the style statement and social esteem that it brings along. But what catches the attention of most is the interest rate charged by the lenders on a car loan. The interest rates on car loans can be either fixed or floating. With fixed, the rate of interest remains the same throughout the tenure of a car loan. In the case of floating rate, the lending rate changes based on the changes brought in by the lenders either in its Marginal Cost of Lending Rate (MCLR) or the base rate.
Here are the interest rates on car loans offered by various banks in India.
|Allahabad Bank||8.45% Onwards|
|Andhra Bank||10.15% Onwards|
|Axis Bank||9.05% - 11.30%|
|Bank of Baroda||7.50% - 9.50%|
|Bank of India||7.75% - 8.35%|
|Bank of Maharashtra||8.85% - 9.10%|
|Canara Bank||7.70% - 10.25%|
|Central Bank of India||8.20% - 8.30%|
|Corporation Bank||8.50% - 9.00%|
|Dena bank||8.65% - 10.25%|
|Federal Bank||9.05% Onwards|
|HDFC Bank||8.11% - 15.80%|
|ICICI Bank||9.30% - 12.85%|
|IDBI Bank||9.20% - 9.80%|
|Jammu & Kashmir Bank||8.35% - 9.10%|
|Karnataka Bank||8.85% - 10.70%|
|Karur Vysya Bank||9.00% - 9.25%|
|Lakshmi Vilas Bank||9.20% Onwards|
|Nainital Bank||7.80% - 8.90%|
|Oriental Bank of Commerce||7.80% - 8.05%|
|Punjab & Sind Bank||7.50% - 7.85%|
|Punjab National Bank||7.80% - 8.05%|
|RBL Bank||12.00% - 14.00%|
|SBI||8.15% - 8.50%|
|Syndicate Bank||8.75% - 9.25%|
|UCO Bank||7.85% Onwards|
|United Bank of India||8.60% - 8.75%|
|Vijaya Bank||7.75% - 8.50%|
|Yes Bank||9.25% Onwards|
Features and Benefits of Car Loan
Here are some of the key features and benefits of car loans.
Allows you to purchase a car even if you don’t have all the money for it in cash.
Car loans help to finance the on-road price of the car.
They can even finance 100% of the on-road price. This means no down payments.
With some banks offering financing in the crores, you are not limited in your choice of cars
Most car loans in India are secured loans. This implies that the car serves as the security/collateral for the loan.
Availing a car loan is simple as compared to other loan products. Individuals with slightly unsavoury credit scores can also hope to procure one. However, this option differs from bank to bank.
Car loans in India generally offer different fixed interest rate options. This means you are always assured of a fixed amount that needs to be repaid monthly.
Lenders also offer interest rates based on your credit score so a high score to get you a cheaper loan.
Car loans can be used to buy a new car as well as a pre-owned or used car.
Eligibility Criteria for Car Loan
You may be eligible for a car loan in India from one or more banks if you meet the following eligibility conditions:
Minimum and Maximum Age - 18 years – 65 years. However, many banks require a minimum age of 23 years.
Loan Amount - Up to Rs. 50 lakhs. Some banks give a maximum loan up to Rs. 1 crore. The loan amount depends upon the value of the car and the EMI you can pay.
Net Monthly Income - Minimum Rs. 18,000 per month
Employment Type - Available for salaried, self-employed and businessmen. Interest can range from 9.25% to 20.00%.
Minimum Work Experience –
Salaried: a minimum of 1 year of total work experience
Self Employed: business existence of a minimum of 5 years
ITR of a minimum of 2 years
CIBIL Score - CIBIL 700 & more. Most banks avoid giving loans if you have a low credit score
Important Points to Remember While Availing a Car Loan
Explore the best discount and offers – Always check current offers and cheapest car loan interest rates offered to employees of large reputed companies.
Study interest rates based on loan amount– Some banks offer the lowest interest rate for a car loan for a high loan amount. The loan amount can vary by the value of the car used for calculating LTV. Banks may use the on-road price or ex-showroom price as the value of the car and both result in significant differences in the loan amount offered.
Consider the type of insurance needed - Comprehensive, Third Party, or Zero Dep insurance. Check and compare the cost, coverage and claim settlement ratio.
Avoid taking loan amounts more than eligibility – Applying for an amount higher than your eligibility may lead to rejection of your loan application.
Avoid availing loans from multiple banks – Simultaneous loan applications get recorded in your CIBIL report and can hurt your chances of getting a loan.
Look beyond the dealer - The loan offered by your dealer may not be the lowest interest rate or best loan. Evaluate other options. Check with your salary bank as well as compare offers from various banks on our online platform.
Steps to Follow While Availing a Car Loan
Verify Credit Score: Your credit score is very important in determining what rate you’re offered on your loan and whether you will even get the loan. The credit score is based on your credit report of the past. It’s always a good idea to know your credit score.
Study Your Budget: It is always sensible to assess one’s affordability to pay each month as loan EMI. Vehicle loans come in short to long tenures wherein longer the term is, lesser is your monthly payment. But a longer-term means you owe more than the vehicle is worth for longer.
Consider Insurance and other costs: Insurance costs and maintenance costs are not covered in your loan amount. It is, however, very important to decide on those funds. Consult with your insurance agent and the lender both, on how the total cost of insurance, maintenance and monthly EMI affect your budget.
Check for Pre-Approval: A pre-approval will work for you for a certain period and a certain amount of money. You can spend up to that pre-approved amount on your car. Even if you do not have a great credit score, you can still get the loan but for a higher interest rate. It should be taken care of that the whole process is over in 14 days. Some credit scorers might penalize you for too many inquiries into your credit history.
Choose the Right Vehicle: Once pre-approved you can go ahead and choose a car of your dreams. One of the benefits of getting pre-approved is that you can focus on negotiating the best deal. The dealers may try to talk you into longer termed loans which will cost you more in the long run. In case of a used car, first, confirm that the loan you apply covers the option of buying a car from a private party, generally, there are restrictions on the age of the used car and interest may be a little higher
Submit Paperwork: Once the vehicle is chosen, the price negotiated and the budget is decided, the lender would require your documents to finalize the sale. The add-ons such as extended warranty would be offered to you by the auto dealer. These must be carefully researched upon.
Adhere to Payment Schedule: After the sale, the payment schedule is informed to you. It is advised to have an account online so that you can check your balance and make payments with convenience.
Car loan interest rates are calculated on the loan amount, your occupation and the company you are working with. Higher the loan amount, lower will be the interest rate. Some of the popular banks offering car loans are HDFC Bank, Axis Bank, ICICI Bank, SBI and PNB. The maximum loan amount that can be availed depends upon either on-road price or ex-showroom price of the car.