It's hard to imagine life without a car because it would limit your ability to go places for work, errands, or fun, which is crucial for a fulfilling social and professional life. However, as technology advances and resources become scarcer, the cost of cars keeps going up. This makes it tough for the average person to buy a car outright with their savings alone. That's why many people turn to car loans.
Car loans are offered by top lenders in India to meet the high demand for financing both new and used cars. These loans allow you to buy your car and then pay off the borrowed amount gradually through monthly installments, known as EMIs. It's a way for people to afford the cars they need without having to pay all at once.
Car Loan for a Used Car or a New One
Car loans aren't just for buying new cars; you can get them for used ones too. While used cars are cheaper upfront, which means you'll need a smaller loan and lower monthly payments, they often come with higher maintenance costs and extra fees like re-registration, which the loan won't cover. That's why many people prefer getting a loan for a new car instead. Plus, getting approved for a loan for a new car is usually faster and easier.
Buying a pre-owned car through a car loan isn't a bad idea at all. Here are a few reasons why it can be a great deal:
- Cost-effective: Second-hand cars are naturally cheaper, so the loan amount needed will be less compared to a new car loan. This means lower monthly payments, which is easier on your wallet.
- Less demand, more benefits: Since fewer people apply for used car loans, banks often offer special deals and perks to attract customers. This makes the process smoother and more customer-friendly than applying for a new car loan.
- More choices: When buying a pre-owned car, you're not limited by its current market price. The same amount of money could get you a higher model or even a better deal. Plus, insurance costs are lower, and the car depreciates less over time, preserving its value if you decide to sell it later on.
Car Loan Interest Rates
Car loan interest rates are set based on guidelines from the RBI, but they can vary a bit from bank to bank. The rate you get might also depend on factors like how much you're borrowing, how long you'll take to pay it back, your credit history, and how well you've worked with the bank before.
Right now, car loan interest rates generally range from 10% to 15%, but some banks might offer lower rates, like 9.55%.
How to Calculate EMI on Car Loans
Paying off your loan in EMIs can make it much easier and less stressful. However, car loan EMIs can still impact your monthly budget. That's why it's important to figure out the EMI amount beforehand to make sure you can afford the loan you want.
Our MybankingTips car loan EMI calculator is user-friendly and helps you do just that. You can input the loan amount, term, and interest rate, and it instantly gives you the monthly payment you'll need to make. Simply go to the 'Tools' dropdown menu on the top of the page and select the car loan EMI calculator to get started.
Benefits of Car Loans
Getting a car loan in India is a smart move for several reasons. First off, it helps you avoid the hassle of paying a huge amount of cash upfront, which could mess up your budget. Plus, making big purchases with cash might catch the attention of the Income Tax department.
With a car loan, you can keep your savings for other important expenses. What's great is that the loan is tied to the car itself, so you don't have to risk your property or other assets. You can still use your car while you're paying off the loan, and after a few years, you'll have saved up more money and can fully own the car once the loan is paid off.
Taking out a car loan also helps build up your credit history, which is important for getting loans in the future. If you make your payments on time and clear your debts, it shows that you're responsible with money. So, getting a car loan is a safe and reliable way to buy your own car.
Top Banks offering Car Loans in India
More and more people in India want cars, and they're also looking for loans to buy them. This growing demand has led many banks and other financial companies to offer car loans to all kinds of people. Some of the main banks that provide these loans are Axis Bank, State Bank of India (SBI), HDFC Bank, Union Bank, ICICI Bank, and Sundaram Finance.
SBI Bank Car Loan
- Loan Amount: Up to 85% of the on-road price of the car
- Tenure: You can repay the loan over a period of up to 7 years
- Interest Rate: The interest rate ranges from 10.30% to 11.10%
- Characteristics:
- Interest is calculated on a daily reducing balance, which means you pay less interest over time.
- No advance EMI, so you won't need to make an initial payment before receiving the loan.
Axis Bank Car Loan
- Loan Amount: Up to 85% of the ex-showroom price (for most models), and up to 95% on select models.
- Tenure: You can repay the loan over a period of up to 7 years.
- Interest Rate: Ranges from 11.50% to 12.50%.
- Characteristics:
- Offers some of the best interest rates in India.
- Special schemes available for Axis Bank salary account holders.
- Loans are available starting from Rs. 1 lakh onwards.
ICICI Bank Car Loan
- Loan Amount: Up to 100% of the ex-showroom price of the car.
- Tenure: You can repay the loan over a period of up to 7 years.
- Interest Rate: Ranges from 10.75% to 12.75%.
- Characteristics:
- Easy application, approval, and disbursement for the loan.
- Comfortable online application process.
IndusInd Bank Car Loan
- Loan Amount: Up to 90% of the ex-showroom price of the car.
- Tenure: You can repay the loan over a period of up to 5 years.
- Interest Rate: Ranges from 11.00% to 15.00%.
- Characteristics:
- Transparent process with no hidden costs.
- Low Equated Monthly Installments (EMIs).
Union Bank Car Loan
- Car Loan Amount: Up to 75 lakhs.
- Tenure: You can repay the loan over a period of up to 7 years.
- Interest Rate: Ranges from 10.45% to 15.25%.
- Characteristics:
- High Quantum of loan available.
- Flat rate of interest.
- Zero prepayment and processing fees.
Sundaram Finance Car Loan
- Car Loan Amount: Up to 85% of the ex-showroom price for new cars, and 60% of the purchase price for pre-owned cars.
- Tenure: You can repay the loan over a period of up to 7 years.
- Interest Rate: Provided on a flat rate basis.
- Characteristics:
- Minimum waiting period for loan approval.
- Low Equated Monthly Installments (EMIs).
- Attractive interest rates.
- Customized insurance options available.
- Money on wheels or pre-approved car loans offered to existing customers who have been repaying their EMIs on time.
HDFC Bank car loan
- Car Loan Amount: Up to 100% of the ex-showroom price.
- Tenure: You can repay the loan over a period of up to 7 years.
- Interest Rate: Ranges from 10.50% to 12.50%.
- Characteristics:
- Fixed interest rates throughout the loan tenure.
- Loan approval in just 30 minutes.
Car Loan Eligibility Criteria
Almost anyone who meets the basic car loan eligibility criteria can apply for a car loan in India. These criteria are based on factors like age, employment status, and other demographic details, as well as the person's ability to repay the loan. The typical requirements, regardless of the financial institution or loan amount, for someone to be eligible for a car loan approval are:
- Salaried individuals must have been in their current job for at least one year, while self-employed individuals or professionals should have been in the same business for at least two years.
- The minimum age requirement is 21 years, while the maximum age limit is 65 years.
- Applicants need to meet the minimum repayment capacity or salary requirements.
- The borrower can be a salaried individual, self-employed, business owner, or a professional.
- They must be of Indian nationality, whether residing in India or outside.
Car Loan Documents Required
When you apply for a car loan, you'll need to provide several documents to prove things like who you are, how much you earn, and where you live. But the most crucial documents are the ones related to the car you want to buy, whether it's new or used. Having all the right documents is essential to qualify for the loan, and you can't get approved without them. While the specific documents needed may differ depending on the lender, here are the common ones you'll likely be asked for when applying for a car loan:
For self-employed individuals:
- Duly filled application form, available online or at the bank's branches.
- Passport-size photographs, usually 4-6.
- Identity proof, such as Passport, PAN Card, Driving License, Voter ID card, Aadhaar card, or government employee ID card.
- Address proof, like Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, Telephone bill, Electricity or water bills, Credit card bill, or Property tax document.
- Age proof, which may be Voter ID card, Secondary school leaving certificate (class 10), Birth certificate, Passport, Aadhaar card, Pension payment order, or Receipt of LIC policy.
For salaried individuals:
- Latest 3 months’ salary slips.
- Form 16 with proper computation of income.
- Salary account bank statement for six months.
- Latest acknowledged IT return.
- Business stability and ownership proof.
- Last two years’ computation of income.
- Profit and Loss statement.
- Balance sheet certified by a Chartered Accountant.
- Latest six months’ bank statement.
- Last two years’ sales.
- Copies of acknowledged IT returns.
- PAN Card for the lender to verify your credit records.
- Documents providing vehicle information, including sales receipts from the seller.
- Copies of the Vehicle’s Motor Insurance and your Driving License to ensure compliance with applicable laws and protocols.
Car Loan FAQs
1. Is a guarantor mandatory for a new car loan?
Generally, a guarantor is required only if you're unable to meet one or more of the eligibility criteria set by the lender.
2. Can I get a loan for the entire cost of my car?
In many cases, banks offer car loans covering only 80% to 90% of the total vehicle cost. However, some banks may provide financing for the entire cost of the car. It's important to carefully compare the available offers before selecting your loan option.
3. What amount can I expect in terms of the car loan?
The amount of funding you can get for your car loan varies from one bank to another and depends on factors such as the type of car you want and your loan needs. However, in most cases, the minimum loan amount will be Rs. 1,00,000.
4. What car loan repayment tenures are commonly available?
Banks offer repayment periods ranging from 12 months (1 year) to 84 months (7 years) for car loans. The specific tenure depends on factors such as the loan amount and the customer's ability to repay.
5. Which cars are financed by the car loan institutions in India?
Car loans in India cover financing for all types of vehicles, including small to medium-sized cars, Sports Utility Vehicles (SUVs), and Multi Utility Vehicles (MUVs). However, there might be some exceptions, so it's best to ask about this when applying for a car loan or refer to the loan brochure.
6. What are the conditions involved if I wish to pre-pay the entire loan amount?
Banks give you the choice to pay off your entire car loan early, which helps you save on future interest payments. However, usually, you can only make early payments after completing 6 months of the loan. Keep in mind, there might be a small fee, known as a pre-payment penalty, charged by the bank for this option.