Car Loan to Get you Moving

Not very long ago, owning a car was a status symbol. To buy a car, you had to shell out a huge amount of money, all at once. Not everyone could afford this. But with growing needs, changing demographics and an increasing number of lenders offering car loans, owning a car is no longer a luxury, but rather an affordable reality.

Car loans are offered to customers who need financial assistance to purchase a vehicle.

Rising market demand for financing new as well as used cars has led several lenders to offer car loans that are not just highly affordable but also customer-friendly. You borrow the money at a fixed interest rate and repay the amount over time.

Car loans have interest rates as low as 8.4% and are normally repaid over a 1-7 year period. Repaying a car loan in installments enables you to pay for this major purchase over time instead of all at once, making it easier to purchase a car to improve your lifestyle immediately.

Choosing a Car Loan

Cars are expensive. Purchasing a car means spending a huge amount of money. While you may have enough savings to pay for the purchase of a car, taking a car loan is still a good option, mainly for 2 reasons:

  • Firstly, paying entirely from your savings for the purchase of a car disturbs your budget and uses up a sizeable portion of your savings, leaving a big dent in your account. But a car loan gives you the convenience of paying the amount in installments, thus leaving your savings untouched for future use.
  • Secondly, paying in liquid cash for big purchases, such as a car, can bring you under the scrutiny of the IT Department. Besides this, a car loan also gives you the opportunity to build a good credit history by borrowing funds and adhering to the proper repayment schedule.

Types of Car Loans in India

In India, there are three basic types of car loans:

New Car Loan

The funds from this loan are used to purchase a brand new car. The interest rate on this type of car loan ranges from 10%-14% and the repayment tenure spans between 1-7 years.

Used Car Loan

This loan is meant for the purchase of a used car. Most lenders provide up to 85% of the price of the car at an interest rate of 12%-18%. The tenure for a Used Car Loan ranges between 1-5 years.

Loan against Car

This is the third type of loan where the borrower pledges his car as collateral in exchange for much-needed funds. Most lenders offer loan against car for an interest rate of 14%-15%, for a term period of 1-3 years.

Car Loan Against other Assets

Car Loan against Property

While there is no specific car loan which can be availed against property, you can opt for loan against property and use the funds for the purchase of the car. The interest rate and loan quantum vary from one lender to another and also depend on the value of your property.

Car Loan against Fixed Deposit

You can apply for a loan using your Fixed Deposit as collateral. This is considered as an overdraft against your FD account. You will continue to get interest on your FD even when you have taken a loan against it. For this type of loan, you need to apply by filling an application form and providing your FD receipts. The interest rate on this type of loan is only 2%-3%, and you can avail up to 70%-90% of your FD amount as loan.

Car Loan against Credit Card

You can purchase a car by taking a loan on your credit card. The amount you can avail depends on the credit limit on your card. While this option gives you instant access to funds, this may not be a wise thing to do, considering the very high interest rates charged by credit card issuers.

Car Loan against PPF

It is also possible to purchase a car using funds from a loan taken against your PPF (Public Provident Fund) account. However, there are several terms and conditions governing this type of loan. For example, this loan can be availed only during the first 6 years from creating the account, after which the amount can only be partially withdrawn from. The maximum repayment period for this type of loan is 36 months.

Credit Score & Report for Car Loan in India

As with any other loan, lenders usually assess your credit health and carefully consider your repayment history before approving your car loan. A higher credit score improves your chances of loan approval. Typically, a credit score of 750 or above is considered desirable. However, bad credit behavior such as late payments, credit card dues, rejected loans, defaulted payments, and too many loan applications can bring down your credit score and drastically diminish the chances of loan approval.

Personal Loan against Fixed Deposit

Most lenders provide personal loans against fixed deposits. This enables borrowers to obtain funds without breaking their fixed deposits. The primary advantage of such a loan is that the interest rates are much lower than those charged on regular unsecured personal loans. While most personal loans come with a minimum interest rate of 10.99%, loans against fixed deposits may charge only 1% more than the interest rate payable on your fixed deposit.

Features of Car Loan

Manage Your Budget

Plan to purchase your new or used car by finding a loan with monthly installments. Choose the tenure of your loan and manage your budget accordingly.

Easy Sanctions

Car loans don’t require you to have a perfect credit score. Many banks offer car loans to borrowers that have lower credit scores as well as to borrowers with very strong credit scores.

Flexible EMIs

Repay your loan with fixed monthly installment payments that will depend on your loan amount, interest rate and repayment term.

Features and Benefits of a Car Loan

The features of a car loan may vary individually from one lender to another. There are several customized and specialized offers made by lenders to customers. However, here is a generalized look at some of the characteristics and benefits of car loans in India:

  • Car loans are secured loans, offered for the purchase of both new as well as used cars. Most borrowers however prefer to avail a car loan while buying a new car rather than a used one.
  • Car loans typically come with a fixed interest rate, which means a fixed amount has to be paid on a monthly basis as Equated Monthly Installments (EMI). Some lenders provide floating rates of interest.
  • A car loan gives you the opportunity to buy a better car than one that just fits your budget.
  • It eliminates the wait time needed to save up, thus enabling you to quickly realize your dream of owning a car.
  • Characterized by flexible repayment tenures ranging from 1-7 years, car loans allow you to repay the amount through EMIs, thus enabling you to better plan your finances and monthly budget.
  • A car loan is easier to avail compared to most other loans.
  • While the maximum loan amount depends on the type of car to be purchased, and several other factors, most lenders today offer loans for 100% of the vehicle’s ex-showroom price, provided the eligibility criteria are met.

Things to Consider Before Choosing the Right Car Loan

With a host of lenders providing car loans, purchasing a car is not a difficult task. But choosing the right car loan is. While there may be many attractive deals on car loans, here are a few things you should consider before deciding which one to go for:

  • Interest rate on the car loan:  Comparing the interest rates of different lenders can help you find the car loan with the best rate in the market.
  • Fixed vs. floating rates of interest: Some lenders offer fixed and others offer floating interest rates on car loans. Fixed rates are better if you prefer to have certainty in the amount that needs to be paid every month. But a floating rate loan may be better if the interest rates are expected to come down in the future.
  • Other fees and charges: Car loans typically come with additional fees and charges such as processing fees, which may range between 0.5%-2%, documentation charges, etc. Make sure you compare car loans and choose one with the least additional charges.
  • Prepayment penalty: In the event of prepayment or foreclosure some lenders charge a penalty which can go up to 5% of the outstanding amount. Look for a loan that comes with no prepayment penalty or foreclosure charges, or one where these charges are the least.
  • Flexible Tenure: The repayment term of most car loans ranges from 1 to 5 years. However, there are some lenders that offer longer tenures of up to 7 years. Based on your requirement, choose a lender that offers the most suitable repayment tenure.
  • Loan for Ex-showroom or On-road Price: Most lenders provide loans for 100% of the ex-showroom price of a car. However, this is not the on-road price, and it does not include other costs such as registration, road tax and insurance. Typically, car loans cover about 85% of the on-road price of a car. Remember to take this into account in order to choose the right loan.

Top Banks and NBFCs Providing Car Loans in India

Car loans are very popular in India and are being offered by several leading lenders. So banks and NBFCs compete to offer the best deals to borrowers. Some of the features of these deals include lowest interest rates, flexible repayment tenure, 100% financing, easy and quick e-approval etc. Here’s a list of popular lenders offering the best deals on car loans:

  • SBI: State Bank of India has been a leader in the auto finance segment for several years. The low interest rates and longer repayment tenures make SBI one of the most popular lenders.
  • ICICI Bank: This is one of the few lenders offering 100% of the ex-showroom price of a vehicle, as well as maximum flexibility with the repayment tenure. Borrowers can opt for repayment terms up to 7 years. Besides this, ICICI also provides pre-approved car loans for their existing customers with very minimal documentation.
  • Sundaram Finance: Characterized by low interest rates and EMI, and minimum wait time, and customized insurance options, Sundaram Finance car loans have been quite popular with borrowers.
  • HDFC Bank: Providing up to 100% finance and hassle-free loan processing, HDFC bank has remained one of the top choices for car loans among borrowers. Quick loan approval, fixed interest rates and options for long repayment tenures are some of the highlights of car loans from HDFC.
  • Kotak Mahindra Prime Limited: With its flexible schemes, quick loan processing and competitive interest rates, Kotak Mahindra has carved a niche in the market for car loans.

Top 10 Car Loan Non-Banking Financial Companies in India

List of leading NBFCs providing car loans in India:

  1. Bajaj Finserv
  2. Aditya Birla Finance
  3. Mahindra Finance
  4. Tata Finance
  5. Cholamandalam Finance
  6. L&T Finance
  7. Sundaram-Car Finance
  8. Sriram Finance
  9. TVS Car Loan
  10. Magma Fincorp

Car Loan Interest Rates: Banks, NBFCs

S. No. Car Loan Provider Interest Rates
1. State Bank of India 8.90%- 9.20%
2. ICICI Bank 8.82%- 12.75%
3. Sundaram Finance 8.75%
4. HDFC Bank 8.50%- 11.25%
5. Kotak Mahindra Prime Ltd. 11.50%- 13.50%
6. Axis Bank 8.50%- 11.25%
7. Bank of Baroda 8.80%- 10.55%
8. Canara Bank 8.70%- 9.35%
9. Punjab National Bank 8.90%- 9.10%
10. Bank of India 9.25%

Get Financing for Car Loan


Documentation needed to apply for a car loan

 For Salaried Employees

  • Proof of Identity: Copy of PAN card/Passport/Driving License/ Aadhaar Card
  • Proof of Residence: Copy of Voter ID/Electricity Bill/Telephone Bill/Property Tax Receipt
  • Six months bank statements
  • Identification of signature from present bankers
  • Cheque for processing fee
  • Latest salary slips
  • Income Tax returns for previous 3 years

 For Self-Employed Professionals

  • Proof of Identity: Copy of PAN card/Passport/Driving License/ Aadhaar Card
  • Proof of Residence: Copy of Voter ID/Electricity Bill/Telephone Bill/Property Tax Receipt
  • Six months bank statements
  • Identification of signature from present bankers
  • Cheque for processing fee
  • Latest salary slips
  • Income Tax returns for previous 3 years
  • Certificate of registration of practise

 For Self-employed Individuals

  • Proof of Identity: Copy of PAN card/Passport/Driving License/ Aadhaar Card
  • Proof of Residence: Copy of Voter ID/Electricity Bill/Telephone Bill/Property Tax Receipt
  • Six months bank statements
  • Identification of signature from present bankers
  • Cheque for processing fee
  • Income Tax returns for previous 3 years
  • Certificate of proof of business
  • Profit and loss statement of previous 3 years

Car Loan Eligibility

 Eligibility for Salaried Employees

  • Applicant should be between 21-60 years of age
  • Should be employed with a public/ private sector organization
  • Should have been employed for a minimum of 2 years
  • Should have a minimum monthly income of ₹ 10,000
  • Should have been residing in the current address for a minimum of 1 year

 Eligibility for Self-employed Individuals/ Professionals

  • Applicant should be between 21-65 years of age
  • Should have been in professional practice or in business for a minimum of 3 years
  • Should have a minimum annual income of ₹ 2,00,000
  • Should be an income tax assesse
  • Should have been residing in the current address for a minimum of 1 year

Car Loan Application Checklist

Here is a checklist of required documents that can help you complete the loan application process:

  • 1 passport-size colour photograph
  • Proof of Identity: Copy of PAN card/Passport/Driving License/ Aadhaar Card
  • Proof of Residence: Copy of Voter ID/Electricity Bill/Telephone Bill/Property Tax Receipt
  • Six months bank statements
  • Identification of signature from present bankers
  • Cheque for processing fee
  • Latest salary slips
  • Income Tax returns for previous 3 years
  • Certificate of registration of practice (for self-employed professionals)
  • Certificate of proof of business (for self-employed individuals)
  • Profit and loss statement of previous 3 years (for self-employed individuals)

Frequently Asked Questions

Some lenders do provide 100% of the cost of the car. Others provide 85% of the “on road” value of the car.

Yes, many lenders allow you to repay the loan early. Some lenders require a 6 month minimum outstanding period and some have fees for early payment.

Most types of cars do qualify for financing including sport utility vehicles, sedans, and multi utility vehicles. Each lender has policies for what types of cars they will loan against.

Most lenders require the car to serve as security (collateral) and may require a guarantee from the borrower or a co applicant depending on your level of income.

  • Receive various offers for wide variety of car loans.
  • FinMarket's application saves time and allows you to compare and find best car loan for you.
  • Be informed of your EMI payment details.
  • Choose the right offer for you from a wide array of lenders.
  • No need to visit multiple banks to secure multiple offers.
  • Fill your information just once and receive multiple offers from lenders.
  • Receive offers for products and deals from top lenders that are targeted to your unique needs.

Applying for a car loan with the same bank where you have an account may help you get a quick, hassle-free approval. However, by doing this, you may miss out of some of the best deals on car loans offered by other lenders in the market. So, it is always a good idea to compare loans before choosing one. The easiest way to do this is to apply online through With a single online application, we bring you the best car loan deals from various leading lenders in India.

EMI calculators are a common feature on the websites of most lenders. This EMI calculator works in a simple way. Once you enter the details of your car loan, including the loan amount, interest rate, and tenure, it calculates the EMI in a matter of seconds. However, to manually derive the EMI, you need to apply the principal amount, tenure, and rate of interest in the traditional mathematical formula used for calculating EMI, which is as follows:

EMI = [P x R x (1+R) ^N] / [(1+R) ^N-1]

Here, P stands for the Principal Amount, R for the Rate of Interest per month (which is, Interest rate per annum/ (12x100), and N refers to the number of monthly installments.

You do not need a guarantor for car loans unless you fail to meet any of the eligibility criteria such as the age, income or credit score requirement.

No. Car loans do not bring any tax benefits. Unlike home loans, car loans are not eligible for rebates. So always remember not to exceed your requirement while taking a car loan.

If you have had a good repayment history with the lender for your past loans, then you may be able to leverage your prior relationship as well as your good credit score to negotiate and get a car loan at a lower interest rate.

There are two ways in which you can close out your car loan:

  • By paying the EMI regularly, throughout your full loan tenure
  • By paying the outstanding amount all at once and closing out the loan. If you choose to do this, be aware that you may have to pay a certain percentage as prepayment penalty to your lender.

More importantly, remember that paying off the due amount does not complete the process of closing a car loan. You should also obtain a No Due Certificate from the lender. When you buy a car on loan, the car is hypothecated (pledged as security) to the lender. Once the loan is paid off, this hypothecation has to be cancelled, for which you should approach the Regional Transport Office (RTO) and produce the No Due Certificate from the lender. Following this, your RC book is updated by removing the hypothecation.

Your car loan application may be rejected for one or many of the following reasons:

  • Poor credit score
  • Defaulted payments in the past
  • Multiple loan rejections in the past
  • Insufficient income
  • Inability to produce any of the requested documents


Application Process for Car Loan

With online loan application made possible, applying for a car loan is now a simple process.

Step 1: Compare car loans in the market and pick the one that most suits your requirement

Step 2: Visit the lender’s website and fill-in the online application form

Step 3: Submit the required information along with the requested documentation

Step 4: Get approval

If you want to further simplify the process, leave it to a Visit our website and submit the requested information. We will connect you to the top lenders in the car loan space and bring you the best deals on car loans. You need to fill-in just one online application to get personalized car loan offers from multiple lenders.

How to apply for a car loan online through FinMarket?

  • Click here and fill up the e-application form for car loan
  • Provide the requested information and submit
  • Receive multiple offers from top lenders at competitive rates
  • Compare and choose the lender that meets your unique needs
  • Our online loan application and processing platform connects you to multiple lenders and enables you to find the best deals.

Track your Car Loan application status

Most lenders who provide online services allow you to track the status of your loan application online, by using the loan status tracker on their website. All you need to do is enter your name, mobile number, date of birth, and loan application/reference number in the tracker to track the status of your application, instantly.

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Apply now for a Car Loan online.