Compare Best Car Loan Interest Rates in India for 2021
Compare
Best Car Loan Interest Rates in India for 2021
Bank Name |
Car Loan Interest
Rates |
Processing Fee |
7.25% p.a. onwards |
0.50% of loan amount up to a maximum
of Rs.10,000 plus GST |
|
7.30% p.a. onwards |
0.25% of the loan amount, subject to
a minimum of Rs.1,000 and a maximum of Rs.5,000 |
|
8.65% p.a. onwards |
Minimum of Rs.3,500 and maximum of
Rs.5,500 |
|
8.50% p.a. onwards |
Contact the bank |
|
7.70% p.a. onwards |
Rs.1,000 plus GST onwards |
|
7.90% p.a. onwards |
0.5% of the loan amount |
Car Loan Interest
Rates
Updated on 09 Aug
2021
Car Loan Details |
|
Interest Rate (Monthly reducing
balance) |
7.25% onwards |
Processing Fees |
Depends on the bank |
Loan Tenure |
1 year to 8 years |
Pre-closure Charges |
Varies with bank |
Guarantor Requirement |
Varies with bank |
Note:The interest rates
will differ from one bank to another. This makes it critical to compare the interest rates before
choosing a loan to apply for.
Here's a Tip!
It
is vital that you maintain a good credit score when you apply for a car loan.
Apart from the loan getting approved quicker, lenders will offer low interest
rates if your credit score is good. No security or collateral is required when
availing a car loan. The car acts as the security.
Listed below are some
of the best car loan products you can opt for in 2021:
Key USP |
Bank |
Features |
Loans for Luxury Cars |
HDFC |
·
Effective interest rate is 7.95% ·
Tenure is up to 84 months ·
Maximum loan amount is up to Rs.3 crore ·
100% financing of on-road price for select models |
100%
On-Road Financing |
ICICI
Bank |
·
Effective interest rate starting 7.90% onwards ·
Tenure is up to 84 months ·
The loan amount that can be availed will depend on the
model, cost, customer profile, etc. ·
Pre-qualified and pre-approved customers can avail the
offer |
Designed
for professionals and agriculturalists with no Income Proof |
State
Bank of India |
·
Effective interest rate is 7.70% onwards ·
Tenure is up to 74 months ·
Up to 90% of the on-road price may be financed ·
Loan is provided for professionals and agriculturists |
Small
Loans |
Axis
Bank |
·
Effective interest rate is 8.65% ·
Tenure is up to 96 months ·
Up to 100% of the on-road price may be provided as a loan ·
You can avail a loan of Rs.1 lakh |
Free
Personal Accident Insurance |
Federal
Bank |
·
Effective interest rates start from 8.50% ·
Tenure is up to 84 months ·
No income documents need to be provided ·
Up to 100% of the ex-showroom price can be availed |
Low-Interest
Rates for Used Cards and New Cars |
Canara
Bank |
·
Effective interest rate starts from 7.30% ·
Tenure is up to 84 months ·
Up to 90% of the on-road price may be provided ·
Lower interest rates are provided for women |
Eligibility Criteria
and Documents Required
The car loan eligibility criteria
can be different for different banks. The common criteria are as follows:
·
Age
of the individual must be between 18 years and 75 years
·
Minimum
net monthly income of Rs. 20,000
·
At
least 1 year of employment with the current employer
·
Must
be salaried or self-employed, working for a government establishment or a
private company
To prove your
eligibility, you’ll need to provide certain documents. Though this too is
specific to different lenders, the common documents will be:
Identity proof (any of the following) |
·
Aadhaar ·
Passport ·
Driving license ·
Voters ID card ·
PAN card |
Address
proof (any of the following) |
·
Aadhaar ·
Passport ·
Driving license ·
Ration card ·
Utility bills |
Proof
of income |
·
Form 16 ·
Salary slips if you are salaried ·
Latest Income Tax Returns ·
Bank statements going back 6 months |
Note: Make sure you
check exactly what documents the lender wants. The documents required can
change depending on your situation too. The documents required to take a used
car loan are the same as above.
Car Loan - Checklist
to Follow While Applying for it
Steps |
Requirement |
Inference |
Apply for a car loan |
Compare all offers available |
To find the loan that offers you the
highest loan amount and the most affordable interest rate |
Submit Income Proof |
Bank Statement (last 6 months)
Pay-Slips (last 3 months) IT- Returns (last 2 years) |
Lender wants to establish your
ability to repay the loan |
Submit Proof of Address and Identity |
PAN Card, Voter’s ID, Aadhaar Card,
Passport, etc. |
Lender wants to establish your
nationality, identity, and permanent address |
Credit History |
PAN Card |
Lender wants to check your past
credit records and establish if you can be trusted to make regular repayments |
Information About Vehicle |
Sales Receipts from the showroom from
where the vehicle was purchased |
Lender must confirm that the deal was
affected as intended |
Proof of Insurance and Driving
License |
Copies of the vehicle’s Motor
Insurance and your Driving License |
Lender must establish that all laws
and protocols are followed with regards to the purchased vehicle. |
Personal Loans vs. Car Loans
When
it comes to a big purchase – for example a car, we often resort to loans for
the financing of the same. Both personal loans and car loans are two of the
biggest and most common financing options that are availed by consumers.
A
personal loan can be used for any purpose. There are no bindings in the case of
personal loans. However, car loans are particularly available for car
purchases. To have a better understanding, you can check the pros and cons of
both the products.
Pros and Cons of
Personal Loans
Pros:
·
There
are no restrictions in regard to the usage of the funds. The loan amount can be
used for any purpose.
·
It
offers the flexibility in the payment structure.
Cons:
·
The
interest rate for a personal loan is likely to be higher as it is an unsecured
loan product.
·
Owing
to its unsecured nature, personal loans also come with more stringent lending
criteria.
·
Credit
score plays a major role in ascertaining your eligibility for the loan.
Pros and Cons of Car
Loans
Pros:
·
Car
loans usually have a lower rate of interest.
·
It
is easier to avail a car loan.
·
Since
it is a secured loan, an individual with a mediocre credit score is also likely
to be eligible for the loan.
·
The
vehicle itself acts as a security against the loan.
Cons:
·
You
will be required to provide a down-payment.
·
The
car will be hypothecated to the bank and you will receive the complete
ownership only after all payments have been made.
However,
it is advised that you compare different loan products and then choose the one
that suits your requirements.
How to Calculate Car
Loan EMI?
The Equated Monthly
Installments (EMIs) that you will pay will depend on a few key factors.
·
The
size of the loan
·
The
interest rate that is applicable to the loan
·
The
tenure of the loan
·
The
processing fees
The higher the loan
amount, the higher your EMI will be. Similarly, the shorter the loan tenure the
higher the EMI. To find the best compromise between an affordable EMI and
duration you should check out our car loan EMI calculator.
Choosing the Right
Car Loan
The following table
explains the do’s and don’ts when choosing the right car loan:
Do’s |
Don’ts |
Compare - BankBazaar.com can help you
compare the various car loan options available to you. |
Eligibility - Do not apply for a loan
amount that exceeds your eligibility, as this will result in the rejection of
your loan application. |
What’s the Interest? – Choose a loan
that offers you the best interest rate along with the loan amount you need. |
Multiple Applications - Do not apply
with multiple banks as this will have a negative impact on your credit score. |
Keep it Simple – Choose the car
before applying for the loan and make sure the cost of the car fits your
budget. |
If your application is rejected,
don’t continue to keep apply at different banks. Chances of rejection will
rise. |
Hidden Fees and Charges - Sometimes
what appears as obvious will have a hidden component. Be aware of the hidden
fees and charges concerning the car loan. |
Relying on the Dealership for loans -
The loan that the dealer offers may not have the best interest rate. So,
check the other options. |
Special offers – There could be
special offers available when you are applying for your loan. Make sure you
take advantage of them |
Don’t pick a car with a high service
cost because you already have the EMI and the insurance premiums to pay. |
Insurance – Check the insurance
premium for the car as this is a recurring cost. |
In case of bad credit, is a long-term
car loan a better option?
According to
financial experts, it is always recommended to opt for a short-term loan in
case you have bad credit. Even though the monthly payments will reduce, the
interest rates will be much higher for long-term loans. The interest rates are
usually high in case you have bad credit, and long-term loans will further
increase it. Negative equity is another risk that comes with long-term loans as
well. Negative equity comes into effect when the value of the car is lower than
the loan amount. The chances of the car needing repairs during the loan
duration also increase. Over a duration of time, wear and tear occur and there
are chances of major repairs which could increase the costs as well.
Features and Benefits
of Car Loan
When it comes to car
loans in India, in general, the following features and benefits are offered.
Note that, the following is a generalized look at the advantages offered by car
loans. Individually, car loan lenders may have highly customized and
specialized offerings for their customer base.
·
It
helps you purchase a car even if you don’t have all the money for it right now.
·
Most
car loans will finance the on-road price of the car.
·
Some
car loans will 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 loan offerings in India are secured loans. This implies that the car serves
as the security/collateral for the loan.
·
Procuring
a car loan is usually simple when 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 often offer fixed interest rate options. This means, you are
always assured of a fixed amount that needs to be repaid monthly.
·
Many
lenders will offer interest rates based on your credit score so a high score to
get you a cheaper loan.
·
Car
loans are not meant for just new cars. A used car loan can help you buy a
pre-owned car.
Car Loan Approval -
Steps to Get the Loan Approved Faster
When you want to
receive funds to purchase the new or used car that you have been eyeing for a
while, it is better that you opt for a pre-approved loan. To avail such a loan,
you can follow a few steps to quickly receive the required funds.
·
Check Your Credit Report You can check your credit report
to verify your standing in terms of credit score. A score of 750 or more can
get you a lower interest rate. However, the interest rate for a score of 650 to
750 will be slightly higher. If you have defaults in your report, or have a
very low score, your application may be rejected.
·
Pay Your Bills on Time In order to avail a loan to
purchase your dream car, you must have a minimum monthly pre-tax income and a
manageable debt-to-income ratio (DTI). While it is usually not possible to
change one’s income, you can improve your DTI by clearing off all your pending
credit card debts.
To create a better
credit profile, you should always pay your bills on time. If that is not
possible then you can make timely payment of your bills at least 6 months prior
to the loan application. If you pay your bills on time, it assures the lender
that you will also repay the Equated Monthly Installments (EMIs) on time. This,
in turn, will help you secure a loan easily.
·
Look for Car Loan Options There are multiple options
available in the market through which you can get a loan to purchase your new
or used car. You should check the car loan interest rates of
different banks and car financing firms in order to find the one that fits your
needs.
·
Borrow as Less as Possible By paying a larger amount upfront
as down payment, you can reduce the sum that you will have to borrow in order
to match the price tag of the car you have chosen. If you borrow a lesser
amount, you will be in a better position to repay your loan quickly since a
smaller loan amount means smaller EMIs or a shorter loan tenure. Additionally,
the amount that you will have to pay to your bank or car financing organisation
as interest will also reduce.
·
Be Sure to Choose a Plan That Fits Your Budget The repayment
capability of an applicant greatly impacts the approval of a loan that he or
she has applied for. As you decide to get a loan to purchase the car that you
have always wanted, you should make sure that you choose a scheme that you can
afford. If you are already paying EMIs for other loans that you have availed,
you should ensure that you can also pay the EMI of the car loan that you
choose.
·
Pay Attention to the Terms of the Loan A car loan that
has low monthly EMIs but consists of a longer tenure might not be viable for
you. Before you finalise your financing scheme, you should always try to opt
for a plan that carries the lowest interest rate and the shortest loan tenure
as possible. Avoid being tricked into an expensive payment situation by
ensuring that the loan terms are conclusive.
·
Get a Car Insurance with Complete Coverage While offering
a loan, the main concern of banks and NBFCs is not to incur any losses.
Therefore, having a full-cover insurance is a requirement for many
organisations before sanctioning a car loan as it helps recover the balance
debt in case there is an accident wherein the borrower is at fault.
Foreclosing a Car
Loan
When you take a car
loan, you can repay it in equated monthly instalments (EMIs) till the end of
the repayment tenure. However, if you decide to pay off the outstanding loan
amount before your tenure ends, you will be foreclosing or prepaying your loan.
The foreclosure/prepayment facility is offered by most lenders for a penalty
fee though some lenders may allow you to foreclose/prepay your car loan without
charging you any penalty.
You can foreclose
your car loan if your income has increased and you wish to clear off your
liability. It also takes away your burden of having to make monthly EMI
payments. Foreclosing a car loan will release
the hypothecation on the car and give you full ownership.
As stated above, some
lenders may charge you a penalty on loan foreclosure. Hence, before you decide
to foreclose a loan, it is a good idea to go through the clauses associated
with it carefully.
Top-Up Loan on Your
Car Loan
If, after taking a
car loan, you need quick or additional funds for purposes such as a wedding,
home renovation, medical emergency, etc., you can get a top-up loan on your
existing car loan. You can avail up to 150% of the car’s value as a top-up
loan. Most lenders that offer a top-up on their car loans will require you to
maintain a clear payment record for at least 9 months. The process to avail
a top-up loan on your existing car loan is
quick and requires minimal paperwork.
Some of the banks
that offer top-up on their car loans are HDFC Bank, Axis Bank, ICICI Bank, and
Kotak Mahindra Bank.
Car Refinancing
When you take a new
loan to pay off the outstanding balance on your existing car loan, it is known
as car refinancing. You can choose to refinance your car loan if you wish to
replace your current loan with better features such as low interest rates, extended
repayment tenures, etc., or simply to change the terms of your current loan.
The most common reason why people refinance their car loans is to save money.
When refinancing a car loan, you can avail a new loan that offers lower
interest rates which, in turn, will save you money. You can also lower the
equated monthly instalments (EMIs) by choosing a longer repayment tenure with a
new lender through car refinancing.
Car refinancing is a good idea when
there has been a drop in interest rates since you took the original car loan,
your financial condition has improved, you are unable to bear the burden of
high EMIs, and if you feel you did not get a good deal on your car loan the first
time around. However, refinancing on a car loan does not make sense when you
have already made a substantial repayment of your original loan, your car value
has depreciated, the prepayment penalties are high, and when you have plans to
apply for new loans in the future as refinancing may impact your credit score
negatively.
Things to keep in mind when availing a
used car loan
In India, buying used
cars are very popular. There are various finance options also available in case
you wish to buy a pre-owned car. Most Non-Banking Financial Companies (NBFCs)
and banks offer loans for pre-owned cars. However, various points must be
considered before buying a used car on loan. It is important that you compare
the interest rates offered by various banks and NBFCs before selecting one. The
loan tenure must also be chosen wisely. Even though the EMI amount will reduce
for longer tenures, the interest rates would increase. The rate of interest for
used car loans range between 8.8% and 17%. It is vital that you check the
processing fees that are being levied as well. Few NBFCs and banks charge a
high processing fee.
Income Tax Benefits
on Car Loans Taken to Purchase Electric Vehicles
If you have taken a
car loan to purchase an Electric Vehicle (EV), you can now enjoy a tax rebate
of Rs.1.5 lakh on the interest paid. This was announced in the latest Union
Budget (2019-20) by Finance Minister Nirmala Sitharaman and is a part of the
government’s efforts to stimulate the adoption of environment-friendly mobility
solutions. If you have purchased an electric vehicle, you will be able to avail
a benefit of about Rs.2.5 lakh during the entire term of the loan. The
government has also slashed the tax rates on electric vehicles to 5% from the
earlier 12%.
Car Loan Versus Car
Lease
Financing and leasing
are two methods through which people can get a new car. In both cases, the car
owner/lessee would have to make monthly payments. The bank/leasing company
would have a stake in the vehicle as well.
There are several
differences between car leasing and car purchase through
a loan. Listed below are some of the differences:
·
People
who like to change cars every 3-4 years may find it more advantageous to lease
a car as opposed to financing it. This way, the hassle of maintenance is also
taken care of by the lessor.
·
When
the lease period expires, the lessee can return the car to the leasing company.
He/she does not have to go through the process of car valuation and sale, as
would be the case if he/she owned the vehicle.
·
In
the event of leasing a car, there is a restriction on the distance you can
drive it for. This kind of restrictions are not there when you are the owner of
a financed car.
·
Another
disadvantage of leasing a car is the fact that you will be unable to customise
the vehicle based on your personal preferences.
Check Latest Car
Prices in India
With the automobile
industry expanding at a rapid pace and with more and more car manufacturers
establishing their bases in India, buying a car has become a hassle-free
procedure. Car prices in India vary depending on
the segment of the car purchased and with the additional features provided by
the manufacturer. BankBazaar offers a comprehensive list of car prices across
various models of cars sold in India. Be it a hatchback, sedan, luxury sedan,
SUV or MUV, we equip you with the necessary pricing information to help you
decide on the right car suited for your needs and current financial situation.
Check Top Car Dealers
in India
Car dealerships in
India are committed to providing quality services across all areas of car
servicing and maintenance. Majority of the car dealers in India have tie-ups
with the automakers to impart training to their technicians in maintenance,
diagnostics, system check, etc. Staff training and expanding the facilities is
a continuous process taken up by dealers to ensure that customers receive the
best value for the money they pay. Right from the sale of brand-new cars and
used cars to periodic maintenance and customer support, the dealership outlets
offer a wide variety of services. Nowadays, most dealers list out their
services online to ensure a seamless customer experience without requiring
face-to-face interactions.
FAQs about Car Loans
1. Can I get 100%
funding to buy a car?
The maximum amount of
loan that you can avail to buy a car will vary from lender to lender. Most
banks offer financing up to 90% of the on-road price of the car but there are
some banks such as HDFC Bank, ICICI Bank, etc., that offers financing for up to
100% of the car’s on-road price.
2. Can I pre-pay the
entire loan amount? What are the conditions involved?
Yes, you can prepay
the entire car loan and save on vital interest payments in the future. However,
most banks will allow the pre-payment option after you have chalked off 6
months on your loan tenure. Plus, you will be expected to pay a small fee as
pre-payment penalty that will be dependent on the leftover loan amount.
3. What car models are
financed by the standard car loan in India?
Unless otherwise specified,
almost all small to medium sized cars, Commercial Vehicle Loan, Sports Utility
Vehicles (SUV), and Multi Utility Vehicles (MUV) come under the purview of car
loans available in India. However, as mentioned, refer to the loan brochure for
exceptions to this rule.
4. When applying for the
car loan, do I need a guarantor/ security?
Almost all car loan
products available in India are secured loans, with the procured vehicle itself
acting as the customary security. Most lenders in India will not insist upon
any guarantors; however, if your annual income does not match up to the
expected requirement, then you may be expected to sign-up a co-applicant and/or
guarantor.
5. What are the commonly
available car loan repayment tenures?
Repayment tenures
usually range from 12 months to 84 months (1-7 years).
6. What kind of a credit
score do you need to buy a car?
Just like with most
loans, a high credit score above 750 is ideal. But you can still apply for a
loan if your credit score is above 600. Remember, if your score is too low,
your application may be rejected.
7. Will my credit score
affect the interest rate?
Yes. Some banks will
offer lower interest rates to applicants with high credit scores. Likewise,
borrowers with low credit scores will have to bear higher interest rates.
8. What is the minimum
credit score I need to get a car loan?
When you apply for a
car loan, lenders will look for a credit score of at least 750. Below this
score, lenders may be reluctant to lend to you as it indicates your low
repayment capacity. Some banks may offer you a car loan despite your low credit
score but they may charge a higher interest rate.
9. Should I take a car
loan from the car dealership or bank?
Before you apply for
any car loan, ensure that you explore all the options available. Once you
explore, you will get an idea about the benefits offered by various lenders on
their car loans. Compare the benefits offered and pick a lender that fits your
requirements. Whether it is a bank or a car dealership, pick the one that
offers better interest rates.
10.
Do banks offer finance for used cars?
Yes. Many top lenders
such as SBI, HDFC Bank, ICICI Bank, etc., offer loans to buy used cars. These
lenders offer car loans for up to 85% of the car’s value provided that the car
is not more than 5 years old. Used car loans can be repaid in a maximum of 7
years.
11.
What will lenders look for when I apply for a car loan?
One of the most
important factors that lenders consider before offering you a car loan is your
credit score. As stated above, a credit score of above 750 can fetch you lower
interest rates and other benefits. The other factors that lenders look for when
you apply for a car loan are your employment status, residence and job
stability, income, debt-to-income ratio, etc.
12.
What is the lowest EMI that I need to pay for a car loan?
The amount of EMI
(equated monthly instalments) that you will be paying towards your car loan
will depend on the interest rate, loan amount, and the repayment tenure you
choose. You can calculate the EMI by using the EMI Calculator tool available on
the BankBazaar website. For example, let us suppose that you avail a car loan
of Rs.1 lakh at an interest rate of 12% for a tenure of 5 years. Using the
tool, we calculated the EMI and found it to be Rs.2,224.
13.
How much down payment do I need to make to buy a car?
Making a higher down
payment will mean that you will need to avail a lower loan amount to buy a car.
When you avail a lower loan amount, there are chances that banks or lenders may
offer you a car loan at lower interest rates. This is simply because if the
loan amount is lower, the repayment will be quicker. So, though there is no
hard and fast rule to how much down payment you should make, a higher down
payment will ensure that your debt liability is lesser.
14.
Can I get a lower interest rate if I have a good credit
score?
If your credit score
is above 750, you can negotiate with the banks to offer you a car loan at a
lower interest rate. Many lenders will let you negotiate on the interest rates
since your high credit score is an indication of your high repayment capacity.
Some lenders may also offer you a waiver on the processing fee if you have a
good credit score.
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