Owning a car is no longer a luxury, but it has become a necessity. Whether you drive to work or enjoy weekend drives with the family, having a car can simplify your travels and not to forget the ease and comfort it brings. Purchasing their dream vehicle is easier than ever before for millions of Indians – thanks to the widespread availability of car loans in India.
Car loans offer you the money for the vehicle upfront. You can then comfortably repay the borrowed amount via affordable monthly EMIs. An auto loan is a secured loan, as the car acts as the guarantee. There is no need to provide any additional asset or mortgage while procuring the loan.
Before you apply for an auto loan, you need to compare the interest rates charged by lenders. Even slight variations in the interest rates can play a huge role in increasing or reducing your overall burden.
To make it easy for you, here in this guide, we list out the interest rates charged by leading lenders for auto loans in India. You can use this handy table to quickly compare the interest rates before you make a decision.
Car Loan Interest Rates of Leading Lenders for 2020
|Name of the Lender||Interest Rates|
|Axis Bank||9.05% - 11.30%|
|Bank of Baroda||Starts from 8.65%|
|Bank of India||7.75% - 8.35%|
|Canara Bank||7.70% - 10.30%|
|Central Bank of India||Starts from 8.60%|
|Corporation Bank||8.50% - 10.75%|
|HDFC Bank||8.80% - 10.0%|
|ICICI Bank||Starts from 9.0%|
|IDBI Bank||9.30% - 9.90%|
|Indian Bank||Starts from 9.65%|
|Oriental Bank of Commerce||9.05% - 9.15%|
|Punjab National Bank||8.75% - 9.20%|
|State Bank of India||7.95% - 8.65%|
|Tamilnad Mercantile Bank||10.65%|
|Union Bank of India||7.80% - 7.90%|
|United Bank of India||8.60% - 8.75%|
*Note that the interest rates given here are subject to change and are for new four-wheeler loans. Always connect with your preferred lender for the latest rates.
Factors that impact Car Loan Interest Rates
When you approach a lender, the lender evaluates your profile using specific criteria. Depending on these factors, you may be able to avail of a lower interest rate. Here are the top factors that play a role in influencing interest rates of your auto loan.
Higher the credit score, lower the interest rate, and vice versa. This is because a high credit score indicates that you are creditworthy, making your application less risky for the lender. So, if you're looking to snag a car loan at low-interest rates, it's a good idea to maintain a healthy credit score. Keeping good credit scores also helps you avail additional benefits like pre-approved loan offers, instant processing, etc.
The quantum of car loan borrowed also plays a crucial role in determining your interest rates. Generally, lenders offer a concession on the interest rates for borrowers who go for high loan amounts. However, note that this benefit may not be available with all lenders.
Lenders prefer borrowers who have a high repayment capacity. If you have a stable and high income, it indicates that you won't have difficulties in repaying the loan. As a result, the lender is likely to offer discounts on interest rates.
Lenders offer discounts on the interest rate if you go for a shorter tenure. This is because it indicates your commitment to complete the loan faster.
Relationship with the Lender
If you have a pre-existing relationship with the lender, you can try negotiating with the lender to get the loan at lower interest rates. For instance, banks offer special interest rates for existing customers who hold FDs, a savings bank account, or other investments with the bank.
FAQs on Car Loan Interest Rates
Can I negotiate the interest rate with the lender?
Yes. If you have a good credit score, stable job, and good income, you can negotiate with your lender for a lower interest rate. However, note that honouring your request for a lower rate is at the sole discretion of the bank or financing company.
Should I go for floating or fixed rate auto loans?
Lenders offer both floating and fixed interest rates on car loans. With a fixed-rate mortgage, the interest rate is fixed for the entire duration, and the EMI remains the same for the tenure. On the other hand, with floating-rates, the interest rates vary based on external conditions.
If you would like to plan your personal finances ahead, then a fixed-rate car loan might be the better choice for you, as the EMI remains fixed for the entire tenure. Similarly, if you predict that interest rates are likely to go up in the future, then it’s highly recommended that you go for a fixed-rate auto loan.
On the other hand, if you do not mind variations in EMI with market conditions, you can go for floating-rate loans. Especially if there is a probability of interest lowering in the next few months.
I have a low credit score. Am I eligible for a car loan? How will it impact my credit score?
When you approach a lender for an auto loan, the first thing that the lender checks are the credit score. If you have a low credit score, then the lender may not sanction your loan request. And, even if approved, you will be charged a higher rate of interest. So, it's highly recommended that you work on improving your credit score if you have plans to apply for a car loan shortly.
Can I reduce the interest rate by volunteering to pay a higher down payment?
Yes. When you volunteer to pay a higher down payment, it reduces the total loan amount and, in turn, the lender's risk. As a result, the lender is likely to offer you the loan at reduced interest rates.
Do lenders offer special discounts on interest rates for women drivers?
Yes. Specific lenders like the SBI offer a discount on the interest rate for women borrowers. So, if possible, you can take the loan in your wife's name to enjoy reduced interest rates.
Compare Interest Rates and Make an Informed Decision
The interest rate determines the overall amount you repay the lender. So, make sure to do your research, compare and evaluate lenders to help you find the best deal. Also, don't forget to check if there are any offers/discounts. Sometimes car dealers partner with lenders to offer car loans at low-interest rates, especially around the festive season. Keep an eye out for these offers and make use of them to purchase your dream car without burdening your finances with sky-high interests.