India is a country where having and owning a car is still considered to be luxury or somewhat of a status symbol, especially in the semi-urban and rural areas of the country. However, it is more of a necessity in today’s world where dependence on public transport is a very cumbersome option, especially in our country where the public transport system is not up to par or infrequent. All the major private and public sector lenders in India provide lucrative car finance options. The interest rates on these car finance or car loan options are quite competitive and the loan amount can be as high as 100% of the ex-showroom price.
Lenders like banks, NBFCs, etc. provide car loans for the purchase of new cars, used cars or second-hand cars as well as electric vehicles. Electric vehicles are slowly gaining huge popularity in the Indian markets too but there is still a long way to go. Despite the tremendous increase in fuel prices recently, every one still dreams of owning a car to their name as one of their life goals.
Car Loan Interest Rates in India for 2021
The current rate of interest on car loans offered by the top lenders are mentioned below.
| Banks | Interest Rates | |
| New car | Used car | |
| Axis Bank | 7.45% – 14.50% | 13.25% – 15.00% |
| Bank of Baroda | 8.40% onwards | NA |
| Bank of India | 7.35% – 8.55% | 7.35% – 8.55% |
| Bank of Maharashtra | 7.40% – 10.40% | 10.05% – 12.90% |
| Canara Bank | 7.30% – 9.90% | 7.30% – 9.90% |
| Central Bank of India | 7.25% – 7.70% | NA |
| Federal Bank | 8.50% | 13.80% |
| HDFC Bank | 7.05% – 12.50% | 9.50% – 16.04% |
| ICICI Bank | 7.90% – 9.85% | 12.00% – 14.50% |
| IDBI Bank | 7.35% – 7.95% | NA |
| Jammu & Kashmir Bank | 7.95% – 8.45% | 10.95% – 11.95% |
| Karnataka Bank | 8.05% – 10.00% | 10.00% |
| Karur Vysya Bank | 7.80% – 8.10% | 12.00% – 16.50% |
| Punjab & Sind Bank | 7.10% – 7.90% | 9.85% – 10.50% |
| RBL Bank | 12.00% – 14.00% | NA |
| SBI | 7.70% – 8.45% | 9.20% – 13.25% |
| Kotak Mahindra Bank | 6.50% – 20% | NA |
| United Bank of India | 7.40% – 7.50% | 10.40% – 10.50% |
| South India Bank | 9.05% – 10.50% | 13.55% – 15% |
What is a car loan?
A car loan is the finance provided by lenders for the purchase of a car (new/used or electric). In most cases, the borrower needs to provide a margin amount or a down payment for the purchase of the car which is usually between 10% to 25% of the ex-showroom price of the car.
Some of the highlights of car loans are tabled below.
| Category | Details |
| Amount of loan | 75% to 100% of the ex-showroom price depending on the lender and the model of the car |
| Rate of interest | 7.25% onwards depending on the lender |
| Tenure | Minimum 1 yearsMaximum 7-8 years |
| Processing Fees | 1% to 5% of the loan amount (based on lender guidelines) |
| Margin Money | Up to 25%-30% of the cost of the vehicle |
Also Read : What is a good CIBIL™ Score for Car Loan in India
What are the factors affecting car loan interest rates?
The car loans are provided by banks and NBFCs but banks usually provide higher loan amounts with lower margin requirements as well as competitive interest rates. The rate of interest depends on various factors which are mentioned below.
- Gender Of the applicant
The gender of the applicant is often considered while determining the rate of interest by many lenders. Most banks provide concessional interest rates for women borrowers.
- Income and Employment status
The income and employment status of the applicant is also considered by the lenders in determining the interest rates. It is also reviewed by lenders to safeguard their interest and ensure the sound repayment capacity of the borrower.
- The credit score of the applicant
The credit score of the applicant is an important factor to be considered. A higher credit score, usually above 750, is preferred by the lenders while sanctioning a loan. A higher credit score will result in a comparatively lower rate of interest.
- Amount of loan
An applicant seeking a higher amount of loan will be charged a relatively higher rate of interest. This is on account of the high risk of lending due to the high exposure.
- Tenure of loan
The tenure of the loan is also an important consideration while calculating the rate of interest. As a general rule, the rate of interest is and the tenure of the loan is directly proportional. The higher the tenure, the higher the rate of interest and vice versa.
- Relationship with the bank
Another important factor to be considered is the relationship of the applicant with the bank. If the applicant is an existing customer of the bank, then the bank can provide the car loan at a reduced rate of interest. Also, there are many combo products like where the home loan and car loan can be applied together at a competitive rate of interest.
Conclusion
Car loans are provided by lenders as easy finance options for all types of cars including new cars and pre-owned or used cars. The rate of interest of car loans have reduced in the current times in order to boost the automobile industry and the economy in general. Hence, applicants can take maximum advantage of the current interest rates to purchase their dream car.
