You have spent months researching different car models and brands to find the perfect car for you and your family. You're so excited to finally own your dream vehicle. You locate the nearest dealer, take the car for a test drive, and are ready to take the plunge into car ownership.

The dealer offers you a car loan offer from a lender they have a tie-up with. You don't give it a second thought and sign the deal.

Hold On! You're making a huge mistake. Generally, most car dealers have tie-ups with auto loan providers to reduce the time and paperwork for their customers. Just because it's readily available, it doesn't mean – this is the right deal for you.

You would have heard the phrase, “in business, there is nothing like a free lunch." The same is valid here. Car dealers receive commissions based on the loans that go through them. Hence, they are eager to provide you with a tempting loan offer. They even sweeten the deal by offering you discounts on car accessories.

The result – most buyers make the mistake of signing the loan deal offered by the car dealer, without researching other options available in the market. Remember that availing a car loan at a higher interest rate not only increases the repayment period but also increases the overall loan burden.

We highly encourage prospective car owners to do their independent research to land the best car loan deal available.

How to find the best deal on car loans? 

Availing a car loan can feel intimidating and confusing, especially if you’re a first-time car owner. Worry not, CreditMantri has got your back. We list down the six simple steps that you need to follow to find the best deal on car loans. 

  1. Finalise your Dream Car – Model and Brand 

Do you already have a specific model in mind? Then, you can skip this step and go to the next one.

Finding the right car for you and your family requires time and research. Start by deciding the type of car that suits your family's needs – a compact hatchback, a luxurious sedan, a sporty SUV, or a functional cross MUV?

Next, finalise your budget. Instead of fixing a specific number, decide on a lower and upper limit. This way, you get plenty of options to choose from. 

Finally, it’s time to compare and evaluate models that fit your criteria. There are plenty of helpful auto review videos on YouTube that can help in your search. Make sure to test drive the vehicle before finalising it. 

Once you have decided on the brand, model, and variant, it's time to get started with the car loan process.

  1. Compare Interest Rates to find the Right Lender

The interest rate plays a crucial factor in determining the overall loan burden. Ideally, you need to look for a lender who offers you the lowest interest rate. However, remember that besides the interest rate, other factors matter as well. Check processing fees, the lender's reputation, prepayment penalties, and additional charges before choosing a lender.

Evaluate lenders based on these criteria and make a shortlist of preferred lenders. 

  1. Check your Eligibility 

Different lenders have varying eligibility criteria. So, make sure that you meet the eligibility conditions of your preferred lender. Generally, most lenders sanction car loans up to six times the annual income of the applicant. Additionally, lenders have other criteria based on residence city, credit scores, and credit history of the borrower, occupation, etc.

Most lenders offer an eligibility calculator on their websites to help prospective borrowers check eligibility within minutes. Alternatively, you can also contact the customer care team of the lender to see if you qualify for a car loan or not. 

  1. Working out the Details – Loan Amount, Tenure and EMI 

Before you approach the lender, you have to work out various loan details - What is the amount you need? What is your preferred repayment tenure? How much EMI can you afford to pay every month? Remember that longer the tenure lower is the EMI and vice versa.

Again, you can use free online car loan EMI calculators to figure out these details. Enter the loan amount, interest rate and tenure to find out the monthly EMI. Play around with the numbers till you reach an EMI that fits your budget. 

Additionally, you may have to provide down payment. Lenders generally do not sanction 100% of the vehicle's on-road price. The maximum loan amount available is limited to 80 – 90% of the car's price. The rest you have to pay out of pocket. If your lender requires a down payment, you need to save for it. Most car owners use the money they get from selling their previous vehicle for a down payment.

If you don't want to wait till you save the amount needed for a down payment, you can approach car loan lenders who offer 100% finance.

  1. Applying for the Loan 

You can apply for a car loan online or visit the nearest branch of your lender. Fill in the application form and submit the required documents. 

The actual list of documents varies from lender to lender. Here is a general list of documents to help you out:

  • Identity proof – Aadhaar card, driving license, voter’s ID, PAN card, passport, etc. 

  • Address proof – Aadhaar card, ration card, passport, voter’s ID, telephone bill, EB bill, insurance copy, etc. 

  • Proof of income

    • For salaried individuals – Form 16 and latest salary slip 

    • For self-employed professionals/businessmen – bank statements for the last six months, IT returns, profit and loss accounts for the previous 2 years, etc.

Once you provide the required documentation, your loan is sanctioned within a few minutes/hours. 

  1. The Final Stretch – Booking your Dream Car 

Once the loan is sanctioned, the loan amount is credited directly in your bank account (or reaches the dealer if the bank has a tie-up with the car dealership). You can then approach the dealer, finalise the model, and sign the ownership papers.

Once this is done, all that is left is to – drive your dream car. That’s it, you’re now the proud owner of a brand new car. 


Car loans are easier to avail than ever before. Finding the best loan among the many offers available on the market takes some time and expertise. Use the tips listed here in this guide to find the best car loan offer for you. Own your dream vehicle with minimal fuss and hassles.