Since the advent of the Covid-19 pandemic, many car lovers are starting to rethink their preferred mode of transport. Dependency on public or shared transportation is being seriously reconsidered as people believe that buying a car can help in minimising the chances of getting infected by the virus.

Since cars require a big investment, many people rely on a car loan to fulfil their dream of owning a car. These days, many car financing facilities are available at lower interest rates as compared to unsecured loans like a personal loan.

How does car financing work?

  1. Amount of loan offered by lenders: If you too are planning to buy a car, you must know that lenders generally finance a maximum of 80%-90% of the car’s on-road price. However, some banks may also offer loan products for financing 100% of the car’s value subject to certain terms and conditions. 
  2. Applicable interest rates: Although car loans fall under the secured loan product category, the applicable interest rates differ across lenders and are dependent on the borrower’s credit score among other factors. 
  3. Processing fees: The processing fee is usually charged as per the lender’s policies. However, a few banks may offer car loans at preferential rates for existing borrowers.
  4. Pre-approved car loans: Many lenders and banks also offer pre-approved car loans to select customers. These generally have concessional interest rates and a faster loan disbursal process. 

To understand more about car financing and calculate your potential car loan EMIs, use the car loan EMI calculator

Comparison of Best Car Loan Offers

To help borrowers make an informed decision, here are the top banks that are currently offering some of the lowest car loan interest rates in the country.

SBI Bank Car Loan 

Car Loan Amount

85% of on-road price


Upto 7 years

Interest Rate

10.30% - 11.10%

Minimum Income Criteria

Net Annual Income of applicant and/or co-applicant if any, should be Rs. 2,00,000/-


Axis Bank Car Loan

Car Loan Amount

85% of ex-showroom price

95% on select car models


Upto 7 years

Interest Rate


Minimum Income Criteria

The minimum net annual salary required for applying for a car loan is Rs. 2,40,000


Union Bank Car Loan

Car Loan Amount

Up to Rs. 75 lakhs


Upto 7 years

Interest Rate

10.45% - 15.25%

Minimum Income Criteria



Sundaram Finance Car Loan

Car Loan Amount

85% of the ex-showroom price for New Cars 

60% of the purchase price on Pre-owned Cars 


Upto 7 years

Interest Rate

12.5% onwards


Things to Remember While Applying for a Car Loan

Here are some of the important points to remember while applying for a car loan:

  1. Compare - There are many car loan options available in the market and all offer different features. Lenders may give different car loan quotes; therefore, it is important to compare, do research and find the perfect car loan as per individual needs. Browse through various categories available and select the appropriate option. Make sure to compare car loan offers from top car loan lenders on our site and make the smart choice.  
  2. Check the Rate of Interest – The interest rate on a loan is the deciding factor that affects the total loan amount. As with any loan, for car loans too, the lower the interest rate the better. Do verify the bank’s terms and conditions in case of drastically low-interest rates.
  3. Ensure Repayment Capability - Don't go by the up-selling tricks at a car loan provider. Ensure to remain aware of your financial limitations and repayment capability before opting for a specific car loan. Also, opt for a car model that meets your requirements and allows you to stay within your financial limits.

How to Improve Car Loan Eligibility?

Here are some quick tips on improving your car loan eligibility before making a loan application:

  1. Work on your credit score – Credit score plays an important role in your loan application being approved. A higher credit score is very crucial to improve the chances of getting the car loan approved. Credit score can be improved in simple ways like, paying off your unpaid credit card bills, clear any outstanding debts, checking for the accuracy of your credit report, etc. If you have multiple credit cards, closing those that are not needed can positively impact your credit score. Always ensure a low credit utilisation ratio to have a good credit score.
  2. Reduce existing liabilities: To improve the chances of securing a car loan, the first step is to pay off all existing debt. Debt management must be taken seriously and you must work towards clearing your past liabilities. This will help in raising your debt-to-income ratio and improve your car loan eligibility.
  3. Apply with co-applicants – Making a loan application along with another earning family member as a co-applicant can improve the chances of the loan being approved. You can add your spouse, parents or siblings as co-applicants, even if the car is not booked in their name. Once you add their income to the application, the chances of income eligibility being cleared become high. This can fetch you a higher loan amount and better interest rates.
  4. Higher Down payment: If you can make a higher down payment as compared to the minimum amount required, the banks may give higher consideration to your application. The higher the down payment amount, the lower will be the loan amount. This can translate into a lower liability in the long term. If the loan amount is lower, the EMIs will also be low and you may find it comfortable while repaying the loan amount. Thus, banks prefer applicants who can make a higher down payment.

Additional Reading: Check Car Loan Eligibility at top lenders in India


While applying for a car loan, always enquire about any hidden charges and clarify your doubts regarding hidden fees with regards to the car loan. At times, there may be certain time-bound incentives offered by the bank. Make the most of these while availing of a car loan to fetch a better deal.


  1. Can I get a 100% car loan?

There are many car loan options in India in which the borrower does not have to make any down payment. These are known as zero down payment car loans. Under these, the bank or lending institution funds the entire car value and therefore, these loans are also known as '100% Finance'.

  1. What is the minimum down payment for a car?

When you take a car loan, some banks may ask you to pay a certain portion (generally 5% to 15%) of the car value to the car dealer before the car loan can be released. This is known as a down payment.

  1. Is it better to get a car loan from the bank or dealer?

You may usually get a lower interest rate on a new car when you avail a loan from a dealer. Some dealers may even offer promotional financing with low rates to those who qualify. In India, many banks have started offering attractive deals on car loans, depending on the down payment you can make.

  1. How much car loan can I get on an Rs. 25,000 salary?

Lenders generally fix the maximum car loan amount at 10 times your monthly salary. Therefore, if your income is Rs. 25,000 per month, you may be eligible for a car loan up to Rs. 2.5 Lakhs.

  1. What happens if a car loan is not paid in India?

If you fail to make EMI payments towards your car loan for 3 consecutive months, lenders will tag it as default and begin action towards recovering it. You may also receive a notice of default, with a period within which you must make the outstanding EMI payment or you could lose possession of the car since it acts as collateral against the loan.