Car Loan Interest Rates

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Car Loan Interest Rates

Car loan Interest RateEvery common man dreams of a car they wish to own and ride as soon as they start earning. But this dream comes true for just a few due to financial constraints. Car Loans allow you to make this dream of your come true at the Lowest Car Loan Interest Rates and minimum documentation. It is a wise option to finance your car through a reputed financing institution in case you face a shortage of funds for purchasing a vehicle of your liking.

Car Loans are a widely chosen method to finance a car as it is a secured type of loan. One must keep in mind that the car you purchase through the loan amount acts as collateral security and the lending institution shall confiscate it in a situation where the borrower fails to repay the loan amount.

Why should one choose Car Loan?

    1. Easy monthly repayment options
    2. Instant Disbursal
    3. Loan Tenure ranges from 1-7 years
    4. Car Loan Interest Rates are affordable
    5. No hidden charges

Car Loan Interest Rates

Although the car loan interest rates depend on the base rates as per RBI directives, there can be seen a variation in the rates from bank to bank. Hence, a deal with a lower car loan interest rate is advisable to avoid any further burden of repayment.

Interest Rate 7.70% onwards
Processing Fee Min 0.24% of the loan amount
Loan Tenure 1 year to 7 years
Prepayment charges Varies with Banks
Loan to Value Up to 100% of ex-showroom price
  • Car Loan Interest Rates depend upon numerous factors such as type of car, occupation, annual income, credit score, loan tenure, and the loan amount requested.
  • The loan amount sanctioned by the bank further is dependent upon the income of the applicant and the type of car they wish to purchase.

Types of Car Loan Interest Rates

A borrower has a couple of options of car loan interest rates to choose from while applying for a car loan. Mainly there are two types of Car Loans:

  1. Fixed Interest Rates: The interest rate on the car loan remains fixed throughout the tenure of the loan. There is no fluctuation and the rate is not dependent upon the market trend. Upon negotiation with the dealer, you can choose an appropriate interest rate that will remain constant. One can go for this type of interest rate if they want to avoid the chance of any uncertainty in the market trend.
  2. Floating Interest Rates: Unlike fixed interest rates, these fluctuate upon base rate or MCLR changes as per RBI directives. Generally, floating car loan interest rates are lower than fixed interest rates. But it may destabilize your financial planning as upon a rise in interest rates, EMI payment will also be higher and vice-versa.

Car Loan Interest Rates Offered By Leading Banks and NBFCs Across India

HDFC Bank:

HDFC Bank Car Loan

Car Loan Amount

100% (ex-showroom price)

Tenure

up to to 7 years

Interest Rate

9.25% onwards

Characteristics
  • The interest rate to be charged is fixed.
  • The loan is usually approved in 30 minutes.
  • Down payment and EMI are low making it affordable.

State Bank Of India (SBI):

SBI Car Loan

Car Loan Amount

85% (on-road price)

Tenure

up to 7 years

Interest Rate

8% to 9.75%

Characteristics

  • Daily reducing balance method of Interest Calculation is used.
  • EMIs are not taken in advance.

IndusInd Bank:

IndusInd Bank Car Loan

Car Loan Amount

90 % of the ex-showroom price

Tenure

up to 5 years
Interest Rate

10.65%

Characteristics

  • Zero hidden costs
  • Transparent process with low EMIs.

Sundaram Finance:

Sundaram Finance Car Loan

Car Loan Amount

85% on New Cars (ex-showroom price)
60% on Pre-owned Cars (Purchase price of the Vehicle)

Tenure

up to 20 years

Interest Rate

8.60%

Characteristics

  • Lowest Waiting period with Low EMIs.
  • Affordable rates of interest.
  • Customized insurance options as per each applicant.
  • Pre-approved Loans to existing customers of the Bank

Axis Bank:

Axis Bank Car Loan

Car Loan Amount

85% (ex-showroom price)
95% (on select models)
Tenure

up to 8 years

Interest Rate

9.25% fixed

Characteristics

  • Best Interest Rates
  • Special schemes for Axis Bank Salary account holders.
  • The minimum amount to be loaned is Rs. 1 lac.
Union Bank:

Union Bank Car Loan

Car Loan Amount

Maximum 75 lakhs
Tenure

up to 7 years

Interest Rate

8.60% Floating

Characteristics

  • You can borrow a High Amount for purchasing your dream car.
  • Interest is charged on a Flat Rate basis.
  • No prepayments and processing fee charges.

Car Loan Interest Rates Features

  • Credit Score: If any individual has a CIBIL score above 750 and has a decent credit history, then banks approve a car loan at affordable car loan interest rates. It is an important factor that banks consider while disbursing loans to ensure their repayment safety.
  • Loan Amount: Considering the cost of the car along with all the additional expenses, the loan amount must be decided. Generally, car loan interest rates are lower on the high loan amount and vice-versa but this trend varies from bank to bank.
  • Loan Tenure: The repayment tenure for the loan taken should be decided in such a way that it is not a burden on the borrower’s shoulders. One would always want to pay off the dues as soon as possible. Lenders charge a lower rate of interest on short loan tenure as compared to a longer tenure.
  • Income: The source and stability of the income of a borrower is an essential factor considered by the lenders before approving for a loan. The amount of loan disbursed also depends upon the income of an individual.
  • Customer Relationship: If an individual already has an existing account with the lender, or has a trusted relationship then they would generally be offered reasonable car loan interest rates. Moreover, full financing of the car is also provided by some institutions in case of a customer relationship with the bank.

A standardized formula is used by the Car Loan EMI Calculator of Dialabank:

E= P. R. (1+R)^n/[(1+R)^n -1]

The variables of the formula are as follows –

P Determines the principal amount
R The rate of interest payable every month
N The total tenure in months
E Total EMI payable each month

Amortization schedule

For a car loan worth Rs. 8 Lakh for 5 years tenure at a 9.5% interest rate.

Principal (Rs.) Interest (Rs.) Principal + Interest (Rs.) Balance to be paid (Rs.)
1 10468 6333 16801 789532
2 10551 6250 16801 778981
3 10635 6167 16801 768346
4 10719 6083 16801 757628
5 10804 5998 16801 746824
6 10889 5912 16801 735935
7 10975 5826 16801 724959
8 11062 5739 16801 713897
9 11150 5652 16801 702747
10 11238 5563 16801 691509
11 11327 5474 16801 680182
12 11417 5385 16801 668766

Fore-closure

  • No fore-closure allowed within 6 months from the date of availing the car loan
  • 6% of Principal Outstanding for fore-closures within 1 year from 7th EMI
  • 5% of Principal Outstanding for fore-closures within 13-24 months from 1st EMI
  • 3% of Principal Outstanding for fore-closures post 24 months from 1st EMI

Processing Fee

The amount charged by the banks to the applicants for facilitating the processing of the loan application of the form is known as processing fees. The rates generally vary from bank to bank.

Lenders Car Loan Interest Rates Processing Fees
HDFC Bank Car Loan Starting from 9.25% p.a.  (Rack interest rate) 0.40%, Max ₹ 10,000 of the loan amount
ICICI Bank Car Loan Starting from 9.30% p.a. Rs.2,500 Min ,Max Rs. 5,000
SBI Car Loan Starting from 8.00% p.a. 0.51% Min Rs. 1,020 Max Rs. 10,200
Axis Bank Car Loan Starting from 9.25% p.a. Rs. 3500 to Rs. 5500
Bank of Baroda Car Loan Starting from 8.90% p.a. 2% of the Loan Amount plus GST
Federal Bank Car Loan Starting from 9.15% p.a. Minimum ₹ 1,500 and Maximum ₹ 2,500.
Union Bank of India Car Loan Starting from 8.60% p.a. 0.50% of the loan amount
Canara Bank Car Loan Starting from 7.75% p.a. Subject to a minimum of Rs.1,000 and a maximum of Rs.5,000
Indian Bank Car Loan Starting from 9.65% p.a. 0.22%(Maximum of Rs.10,191)

EMI Calculator

The Equated Monthly Installment, or EMI, is the monthly payment made to the bank or other financial entity before the debt is fully paid off. Which includes all debt interest and a portion of the principal balance to be repaid. The sum of the principal and interest is divided by the loan’s tenure, or the number of months it must be repaid in. This balance must be charged on a monthly basis. The EMI’s interest component will be higher in the beginning and eventually decrease with each payment. The actual amount assigned to the principal payment is determined by the interest rate. Despite the fact that your monthly EMI allowance will remain unchanged.

Car Loan Eligibility Calculator

  • New Automobile
  • Loans of up to 100% of the road price are available.
  • Pre-Owned Vehicle
  • For a full term of 60 months*, you will borrow up to 80% of the car’s value (can go further depending on profile)

Lowest EMI for Car Finance

Features Car Loan
Tenure 3 – 7 Years
Age 18 – 70 Years
Prepayment charges NIL
Minimum income for salaried ₹ 7,500
  • A car loan is a secured loan that can be used to purchase a new or used car that can be obtained online or offline.
  • The interest rate on a car loan will range from 8.70 per cent to 20.00 per cent.
  • Get a car loan with up to 100% of the vehicle’s value as a loan sum.
  • For an auto loan, the processing rate is as little as 0.20 per cent.
  • A borrower must have proof of identity, address, and income in order to obtain a loan.

Do’s and Don’ts while taking Auto Loan

You will be sent a list of features and bonuses if you take out a car loan. Although each bank has its own package of features and benefits that distinguishes their car loan, these are the standard features and benefits you would get if you take out a car loan.

Compare all of the loans available from banks and NBFCs and choose the one that best meets your needs. – Compare interest rates and see if you have the choice of a fixed or floating rate. – Think carefully of the car you want to lease. If you’re only starting out with your career, a smaller vehicle would be preferable to a larger vehicle, since a larger vehicle may make it harder to repay the loan. Read the terms and conditions, as well as any secret fees and costs. Decide on the insurance – Do not apply to many banks at the same time, as this will damage the credit score.

Schemes under Car Loan related to EMI and Interest

The set money you pay to the bank to pay principal and interest is the monthly sum determined by the car loan EMI calculator. The EMI for a car loan per lakh at an interest rate of 8.70 per cent is as follows:

If you take a loan for just two years, you can pay a higher per lakh EMI of 4,555 for a car loan at the same rate of interest. In this case, you pay a net interest of $9,313 over the course of two years on a loan of one lakh rupees, which is less than half of what you might have paid on a five-year loan.

Steps to take a Car Loan

Here are the steps as given below:

  • To prevent any surprises, start by creating a budget and reviewing your credit score.
  • Then, contact banks, credit unions, or other lenders for pre-approval deals.
  • Compare the various deals to find the best interest rate.
  • Then go to your dealership to pick your vehicle and finalize your loan agreement.

Eligibility for Car Loan

The car loan eligibility requirements are as followed:

  1. Minimum age:  A salaries applicant must be 21 years and a self-employed applicant must be 30 years (co-applicant needed below 30 years)
  2. Maximum age: At loan maturity, a salaried applicant can be 65 years and a self-employed individual can be 60 years
  3. Minimum employment: Salaried individuals should be working for a minimum of 1 year in current employment and a minimum of 2 years of employment. If self-employed then the business should be running for the past 3 years
  4. Minimum Annual Income: For Salaried Rs.18000 / For Self- Employed– 2 years ITR (with previous ITR)

Documents Required for Car Loan

Documents required for a car loan are as followed:

  1. Identity Proof: Passport copy / PAN Card / Voters ID card / Driving License
  2. Income Proof: For Salaried Latest salary slip with form 16 / For Self- Employed Latest ITR
  3. Address Proof: Ration card / Driving license / Voters card / Passport Copy / Telephone Bill / Electricity Bill / Life Insurance Policy / PAN Card
  4. Bank Statement: Last 3 months

How to Apply?

It is a simple and hassle-free process to apply for a car loan online. Just follow these steps and get the best deals in the market.

  • Visit DialaBank
  • On the homepage, go to Auto loans and select Car Loans.
  • You then need to fill an online application form and provide all the necessary details
  • Our Relationship Managers will then get in touch with you and assist you further.

Schemes under Car Loan related to EMI and Interest

  • EMI in repayments scheme: this is a standard method of paying EMI where interest payable at or after the end of the month is paid for a month (and a significant repayment).
  • EMI Scheme Advance: You pay interest and EMI at the start of this month under this scheme. So you pay interest at the beginning of each month, on the amount you have repaid to the Bank.
  • Warning: The EMI should be about 1% below that of the EMI in default if your Bank charges EMI in advance. EMI per Rs. 1 Lakh loan amount for a 5-year car loan with a 10% interest rate in arrears method, as per EMI, is available to those interested in more precise figures of ₹ 2,107.
  • Scheme of zero interest (also known as the financial system for 0 per cent): This is one of the free lunches schemes not available. Be careful, therefore, about schemes that claim zero interest. The car company will likely offer a subsidy scheme in which interest is paid upfront to the Bank. Now you can always request the same amount as a discount for the car dealer. The price of a car is like padding up and selling it under a familiar name to the interest amount.
  • Flat interest rate scheme: You pay the interest in this way on the whole loan’s principal amount until maturity. Therefore on a loan of a total of Rs. 550000 per year, at 10 per cent for five years, a total amount of €15000 per year would have to be reimbursed. The EMI would be 12,500 in this instance.
  • Reduction of the balance: You pay interest in this way on the amount outstanding every month. The balance capital is constantly decreasing with each EMI. With a total of 5 lakh plus interest on a reduced basis that is Rs. 1,37,411 or Rs. 6,37,411, including the principal, you would therefore have to reimburse the total amount of that amount on loan at 10 per cent over five years. The EMI would be 10,624, well 15% lower than that used for a flat-rate scheme in this case.
  • Caution: Do not get caught in the low interest rate of a flat rate system. A flat rate of 10% is equal to the rate of interest of 18.7% based on a 5-year car loan.

Things to remember while applying for a Car Loan

  • Clear off all the previous debts and dues and maintain a good CIBIL score, preferably above 750
  • Make sure the documents you provide are updated and without any errors
  • Avail for a car loan from a reputed lending institution with a clear history to avoid any inconvenience in the future
  • Read the terms and conditions of the agreement thoroughly. There should be no discrepancies which might cause problems later on. Be aware of the hidden and additional charges (if any).
  • Make sure the repayment structure is clarified between the lender and the borrower

Income Tax Advantages on Car Loans Taken to Purchase Electric Automobiles

If you took out a car loan to buy an electric vehicle (EV), you could now claim an Rs.1.5 lakh tax rebate on the interest paid. This was proclaimed by Nirmala Sitharaman (India’s Finance Minister) in the latest Union Budget (2019-20) and is part of the government’s efforts to encourage environmentally-friendly mobility solutions. If you buy an electric vehicle, you will be able to save approximately Rs.2.5 lakh over the life of the loan. In addition, the government has reduced the tax rate on electric vehicles from 12 per cent to 5%.

Leading Car Loan Providers (Click to Apply)

  1. HDFC Car Loan
  2. Kotak Mahindra Car Loan
  3. ICICI Car Loan
  4. Axis Bank Car Loan

News

In 2022, Hero MotoCorp will release the first electric two-wheeler
In India, electric two-wheelers are steadily gaining prominence. Customers now have a few choices to pick from, with big names like Bajaj Auto and TVS joining the fray. Hero MotoCorp has yet to reach this market, but that will soon change.

Hero MotoCorp’s Chief Financial Officer, Niranjan Gupta, has announced that the company will release its first electric two-wheeler in the first quarter of 2022.

Though there are few information about the new product, it is said that the company has been collaborating with Taiwan-based Gogoro on fixed and swappable battery technology.

FAQs for Car loan interest rates:

Can I get a loan to purchase a used car?

Yes, you will have to use your credit history and previous arrangement with the prospective lender to negotiate the interest rate on your car loan. Regularly paying your EMIs on past loans/credit cards with your prospective lender will help you get a car loan with a lower interest rate.

What is the typical tenure of a car loan?

A car loan can last anywhere from one to five years. The higher the EMI, the shorter the loan term, and the opposite is valid for longer car loan terms. Currently, only a limited number of lenders are offering car loans on terms of up to seven years.

Do I need a loan guarantor or co-borrower?

If you are unable to meet the lending institution’s eligibility requirements, such as monthly salary, age, or credit score, a loan guarantor or co-borrower is required. You may even apply for a car loan of your own.

Can interest rates be negotiated?

Yes, you will use your credit history and previous arrangement with the prospective lender to negotiate the interest rate on your car loan. Regularly paying your EMIs on past loans/credit cards with your prospective lender will help you get a car loan with a lower interest rate.

Are there any tax benefits of a car loan?

No, it’s not real. An auto loan, unlike a home loan, does not have any tax incentives. As a result, car loan rates can still be tied to your actual needs; splurging on a fancy car and taking out a big loan is not an intelligent idea.

What is zero per cent Financing?

A few car makers, in partnership with the lender, are offering zero per cent financing. The vehicle manufacturer, rather than the creditor, is responsible for repaying the car loan’s interest to the financier under this scheme.

Why are zero per cent financing car models more expensive than the other ones?

Since the manufacturer is responsible for the interest portion on the car loan, it must maintain a higher profit margin on the transaction. As a result, the price of zero financing car models usually is higher than the price of car models without this feature.

✅What is a  Monthly Reducing balance for Union Bank Car Loan?

Profit and principal make up an Equated Annual Instalment (EMI). When interest is assessed on a monthly basis, the principal paid with interest decreases each month. This saves the customer a considerable amount of money over the life of the loan.

✅What are some of the top car loan providers in India?

Most conventional banks, including HDFC Bank, SBI, ICICI Bank, Union Bank, Kotak Bank, Axis Bank, and others, offer car loans.

✅In which cases can my car loan application be rejected?

If you have a poor credit score, have defaulted on your payments, or have applied for and been accepted for loans several times, your loan application will be denied. To get your loan approved, you must also meet the bank’s eligibility criteria, which include a minimum income level, age, and previous relationship with the bank.

✅What is the tenure for an Axis Bank Car Loan?

Axis Bank offers car loans with flexible terms ranging from 12 to 84 months.

✅What makes of cars does SBI finance?

SBI funds all makes and models of new vehicles and used cars that are less than five years old. As a result, consumers have complete freedom to use whatever car they want.

✅Can I get 100% funding to buy a car with an HDFC Bank Car loan?

Yeah, HDFC Bank Auto Loans provides 100 per cent on-road finance for some car models. A Car Loan of up to Rs 3 crore is secure.

✅What is the tenure of repayment for Sundaram Finance car loan?

Instalments on a Sundaram Finance car loan range from 12 to 60 months. They also offer a 5+2 year Flexible Monthly Instalment option.

 

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