Car loan People are often confused about how much car loan to take. Questions like how much down payment should be, how much tenure should be there, etc. remain in the mind. Let's know the answers to these questions. The bank gives you a car loan only when your credit score is good.
To improve your credit score, you should pay your credit card payment on time. If you delay it, it will affect your credit score. If your credit score is less than 700, then the bank will not give you a loan. Therefore, update your credit score before applying.
These days, the process of launching new cars with the best and high-end features is going on in the country. The bank also charges several types of fees along with the loan amount and interest. This includes several charges like application fee, origination fee and prepayment penalty.
You should read about these charges carefully. Sometimes these charges are very high. First get all the information from the bank, only then sign any documents. You should not take any decision in haste.
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Car loan Interest rates
Lending banks and NBFC companies provide loans on both new and second hand cars. However, the interest rates on both are different. The interest rates for new cars are between 9.25 -13.75 percent, while the interest rates on old cars are between 12.50 and 17.50 percent.
- Uco Bank- Interest rate starting from 7.70%
- State Bank of India- Interest rate starting from 8.65%
- Canara Bank- Interest rate starting from 8.70%
- HDFC Bank- Interest rate starting from 8.80%
- IDBI Bank- Interest rate starting from 8.75%
- Punjab National Bank- Interest rate starting from 8.75%
- Union Bank of India- Interest rate starting from 8.75%
- Axis Bank- Interest rate starting from 9.20%
- Bank of Baroda- Interest rate starting from 8.75%
- Bank of India- Interest rate starting from 8.75%
- Overseas Bank- Interest rate starting from 8.85%
- ICICI Bank Bank )- Interest rate starts from 8.82%
How many types of car loans are there?
There are generally three types of car loans in India, first is new car loan, second is second hand car loan and third is loan on car, this loan is available in all private and government banks of India. NBFCs also give you this type of loan. Because it comes under secured loan.
New Car Loan
According to Kalapaisa, New Car Loan is when you go to buy a new car from the showroom. It is a secured loan and the interest rates on it usually range from 8% to 15%. In this, you have to pay a maximum of 25% of the total loan. Its duration is between 5 to 8 years.
Second hand Car loan
According to Kalapiasa, second hand car loan is when you buy an old car. The bank's rule is that the car should not be older than 5 years at the most. And second hand car loan interest rates range from around 12% to 20% and the down payment is approximately 40% to 60% of the total amount.
Loan on Car
According to Kalapaisa, a loan on a car is a loan that you can take on your old car. The condition is that your car should not be more than 7 years old. The bank will give you a loan of up to 70% of the total cost of your old car. The interest rates on car loan can be around 15% to 21%. Instead of borrowing money from someone, it is better to use your old car.
Documents required for car loan
- Proof of identity (PAN card, passport, driving license etc.)
- Proof of address like voter ID card, passport
- Age proof
- Photograph
- Car documents
- Proof of income like three months salary slip, six months bank statement, income tax return
- Some companies do not finalize the loan without a copy of car insurance and driving license.
Eligibility for a Car Loan
- Age should be between 21 to 58 years.
- Must be a professional or businessman.
- Must be an Indian.
- 700+ credit score.
- Must have good loan history.
Where to get car loan
Bank
It is a little difficult to get a car loan from a bank but once you get it, the repo rate does not make much difference and the interest rate is lower as compared to NBFCs. The bank has your complete history which helps a lot in offering the right loan and also helps in the final credit score.
NBFCs
Car loan is easy and quick from NBFC because they do not have any history and are completely dependent on your documents, that is why their interest rate is quite high and the repo rate will keep on fluctuating. If any EMI is delayed then the entire loan affects your credit score. You will find very few of their branches.
Top Banks for Car Loan.
Bank
- State Bank of India
- Bank of Baroda
- Union Bank
- HDFC Bank
- Federal Bank
- Axis Bank
- Canara Bank
- IDBI Bank
- PNB Bank
- Karnataka Bank
NBFC
- L&T Finance.
- Mahindra & Mahindra Financial Services Limited
- Sundaram Finance
- Shriram Transport Finance Company Limited.
- LIC Housing Finance Limited.
- Indiabulls Housing Finance Limited.
- Power Finance Corporation Limited.
- Bajaj Finserv.
How much should a car loan down payment be?
When you take a car loan, your car is mortgaged in the bank. Higher the amount of car loan, higher will be the EMI you will have to pay and if you take the loan for a short period of time,
Even then you will have to pay higher EMI. If you take a loan for a longer period, your EMI will be less, but you will have to pay more interest.
If the bank had its way, it would give you a loan on zero down payment, but RBI comes in between. So you should make as much down payment as possible so that the EMI is less and the interest rates are less and you can take a loan for a short period.
Try to have only one EMI at a time, then you will be tension free and you will be free to give loans, whether it is car, house, land or business loan. Do not take EMI of more than 40% of your income.