Best Bank For Car Loan in India

Purchasing your dream car can be a thrilling experience, but for most of us, it’s a significant financial commitment. Then we choose to get a car loan. A car loan is a type of secured loan that allows you to borrow money to buy a car. The car itself acts as collateral for the loan, which means that the lender can seize the car if you default on your payments. Car loans are available from a variety of lenders, including banks, credit unions, and online lenders. 

But how do you determine which is the best bank to entrust with your car loan?

Here in this blog, we will be talking about the best 12 banks for car loans, car loan interests, eligibility, and documents required. Also, we will discuss how to calculate your car loan interest rates, types of car loans, and much more!

This guide will definitely help the first-time buyer and even someone who is looking to upgrade their ride. 

Now, let’s ride the same!

Top 12 Banks for Car Loans in India

1. State Bank of India Car Loan
2. Bank of Baroda Car Loan
3. Union Bank of India Car Loan
4. HDFC Bank Car Loan
5. Federal Bank Car Loan
6. Axis Bank Car Loan
7. Canara Bank Car Loan
8. IDBI Bank Car Loan
9. Punjab National Bank Car Loan
10. Karnataka Bank XPress Car Loan
11. Kotak Mahindra Bank Car Loan
12. ICICI Bank Car Loan

Here are the banks that offer a variety of car loan products with competitive interest rates and flexible repayment terms. They also have a wide network of branches and ATMs across India, making it easy for borrowers to access their services.

State Bank of India Car Loan

SBI Bank offers car loans with very low interest rates that are calculated based on how much you owe each day. SBI has four different types of car loans: SBI New Car Loan, SBI Loyalty Car Loan, SBI Assured Car Loan, and SBI Green Car Loan.

You can get a loan for up to 90% of the total cost of the car, which includes things like registration, accessories, insurance, warranty, and maintenance. SBI also gives you the option to get life insurance along with your car loan.

Bank of Baroda Car Loan

Bank of Baroda car loan can help you buy regular cars, SUVs, and large cars for your own use. People with good credit scores get lower interest rates. The interest rates are calculated based on the remaining amount every day. If you pay back the loan on time, there won’t be any extra charges from the bank.

Union Bank of India Car Loan

With the Union Bank of India car loan, you can apply for a loan to buy a new or slightly older car (up to 3 years old). This loan is not just for individuals; companies and firms can also apply for it to provide cars for their employees. When you get this car loan, you need to pay at least 10% of the car’s on-road price as a down payment.

If you want to pay off the loan early with your own money, there are no extra charges or penalties. This makes it more convenient for you to manage your car loan.

HDFC Bank Car Loan

When you choose an HDFC Bank car loan, you get a loan designed just for you. They make it easy to pay back with options like step-up EMI and balloon EMI. If you already have a car loan with them, you can also get extra money without needing more documents.

Federal Bank Car Loan

Federal Bank provides a car loan with some cool features. First off, if you want to pay off your loan early, they won’t charge you any extra fees. Plus, they throw in personal accident insurance for free, covering you for up to Rs.10 lakh.

If you need help covering the whole cost of the car, they can give you a loan for up to the entire ex-showroom price. Also, if you have some expenses related to the car within a month of buying it, they’ll pay you back. 

Axis Bank Car Loan

Axis Bank Car Loan is designed with specific features that cater to the needs of different customers. If you’re a Priority, Privee, or Wealth Banking customer of Axis Bank, you can avail of special benefits when applying for a car loan. This loan is open to both individuals and non-individuals, making it accessible to a wide range of borrowers.

Additionally, if you’re a pre-approved customer or have a salary account with the bank, you might not need to submit income documents or bank statements, making the application process smoother and more convenient.

Canara Bank Car Loan

Canara Bank offers a car loan called “Canara Vehicle,” which can be used to buy both new and used cars. With Canara Bank, you can get a car loan of up to 90% of the total car cost. This includes not only the car’s price but also additional expenses like registration charges, insurance, and taxes.

Depending on the cost of the car, you’ll need to contribute a certain percentage of the loan amount as follows: 10% for cars up to Rs. 10 lahks, 15% for cars between Rs. 10 lahks and Rs. 25 lahks, and 20% for cars exceeding Rs. 25 lahks.

This car loan from Canara Bank is available to various individuals and professionals, but it’s not open to Hindu Undivided Families (HUFs).

Also Read: Business Loan For Women Entrepreneurs In India

IDBI Bank Car Loan

IDBI Bank offers a car loan that helps you buy a wide variety of cars and SUVs. They work closely with car dealers and manufacturers to get you the best possible deals. You can pay your EMIs conveniently through standing instructions or ECS. Additionally, you can make part payments or completely pay off the loan after 6 months without facing any penalty as long as you use your own funds.

Punjab National Bank Car Loan

Punjab National Bank (PNB) makes getting a car loan easy. They team up with top car companies like Tata Motors, Honda Cars India, Maruti Suzuki India, Mahindra & Mahindra, and Force Motors Ltd. This means you can get awesome deals on your car loan with them. It’s not just for people but also for businesses who need a car for personal use.

PNB gives you the choice of having a fixed or a floating interest rate on your car loan. To get a PNB car loan, you usually need to provide some security or a third-party guarantee. But, in some cases, they might skip this requirement based on how trustworthy you are.

If you’re a government employee, they have a special car loan just for you called the ‘PNB Pride Car Loan’. So, no matter who you are, PNB has car loan options to suit your needs.

Karnataka Bank XPress Car Loan

The Karnataka Bank XPress Car Loan has some great features. If you’re a person who owns agricultural land or an agriculturist, you can get this loan. Even Non-Resident Indians (NRIs) can apply for it. You can borrow up to 85% of the car’s on-road price, whether it’s a brand-new one or a used car. This means it’s flexible and suits different car-buying needs.

Kotak Mahindra Bank Car Loan

Kotak Mahindra Bank is a trusted bank in India that offers people affordable options for getting a car loan. You can borrow money from them to buy a car at a low-interest rate of 7.70% or higher. They understand that everyone’s financial situation is different, so they have flexible repayment plans to fit your needs.

Getting a loan from Kotak Mahindra is easy because they don’t ask for a lot of paperwork, and they approve loans quickly. They even provide extra services like insurance and extended warranties for the cars they help you buy. People like getting car loans from Kotak Mahindra Bank because they focus on what’s best for their customers and have fair terms for lending.

ICICI Bank Car Loan

In India, ICICI Bank is a well-known and trustworthy option for people looking to get a car loan. They make it easy for you to finance your car purchase with low interest rates starting at 10.75%. What’s great is that they give you the flexibility to choose how long you want to take to pay back the loan, making it fit your budget.

ICICI Bank has a simple and quick loan application process, and they are known for approving and giving you the money you need fast. If you’re already a customer of ICICI Bank, they make it even easier by offering pre-approved car loans. Because of their strong reputation and their focus on making customers happy, ICICI Bank is a popular choice for car loans in India.

When choosing a bank for a car loan, it is important to compare the interest rates, repayment terms, and other features offered by different banks. It is also important to consider the bank’s reputation and customer service.

Compare Best Car Loan Interest Rates in India for 2023

Car Loan Details

• Interest Rate (Monthly reducing balance): Varies according to the bank.
• Processing Fees: Subject to the policies of the bank you choose.
• Loan Tenure: You can typically choose a loan tenure ranging from 1 year to 8 years.
• Pre-closure Charges: These charges differ from one bank to another.
• Guarantor Requirement: The need for a guarantor varies depending on the bank’s policies.

Best Car Loan Products in 2023

Eligibility Criteria and Documents Required for Car Loan in India

Car loan eligibility criteria may vary among different banks. However, the general eligibility criteria include:

• Age should be between 18 years and 75 years.
• Minimum net monthly income of Rs. 20,000.
• Minimum one-year employment with the current employer.
• Employment types accepted: Salaried or self-employed, working in government or private companies.

To establish your eligibility, you will need to provide specific documents. Although the required documents may differ among lenders, the commonly requested ones include:

Requirements for Individuals:

• 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 (depending on employment type): Form 16, Salary slips (for salaried individuals), Latest Income Tax Returns, and Bank statements for the past 6 months.

Also Read: SBI Personal Loan Interest Rate For Salary Account 2023

Car Loan Application Checklist

How to Calculate Car Loan EMI?

For example, if you take a car loan of Rs. 5 lakh for a tenure of 5 years at an interest rate of 9%, your EMI would be calculated as follows:

EMI = (500000 * 0.09 * (1 + 0.09)^60) / [(1 + 0.09)^60 – 1]

EMI = 10367

This means that your monthly EMI payment would be Rs. 10367.

You can also use an online car loan EMI calculator to calculate your EMI easily and quickly. There are many different car loan EMI calculators available online, so you can choose one that is easy to use and provides you with the information you need.

Choosing the Right Car Loan

Do’s

• Comparison: Utilize resources like BankBazaar.com to compare available car loan options.
• Eligibility: Ensure that the loan amount you request aligns with your eligibility to avoid application rejection.
• Interest Rate: Opt for a loan that provides the best interest rate suitable for your desired loan amount.
• Simplicity: Select the car before applying for the loan, ensuring it fits your budget.
• Hidden Fees: Be vigilant about any concealed fees and charges associated with the car loan.
• Special Offers: Keep an eye out for special offers or promotions when applying for your loan.
• Insurance: Assess the recurring insurance premiums for the car.

Don’ts

• Excessive Applications: Avoid making applications with multiple banks, as this can negatively affect your credit score.
• Continued Applications: If your loan application is rejected, refrain from persistently applying at different banks, as it increases the likelihood of further rejections.
• Dealer Dependence: Don’t rely solely on the dealership for loans; the dealer’s loan may not offer the best interest rate.
• High Service Costs: Be cautious about selecting a car with a high service cost, considering your existing EMI and insurance premiums.

In case of bad credit, is a long-term car loan a better option in India?

• The borrower’s credit score: Borrowers with very poor credit scores may have difficulty getting approved for a car loan, regardless of the loan term.
• The interest rate: Long-term car loans typically have higher interest rates than short-term car loans. This means that the borrower will end up paying more in interest over the life of the loan.
• The borrower’s monthly income: Borrowers with bad credit may also have lower incomes. This means that they may have difficulty making the monthly payments on a long-term car loan.

Features and Benefits of Car Loans in India

Competitive interest rates

Car loans in India are typically offered at competitive interest rates, making them an affordable way to finance the purchase of a car.

Flexible repayment terms

Car loans in India offer flexible repayment terms, allowing borrowers to choose a loan term that fits their budget and needs.

High loan amounts

Car loans in India can be used to finance the purchase of a new or used car, and can cover up to 100% of the on-road price of the car.

Quick and easy loan processing

Car loans in India can be processed quickly and easily, allowing borrowers to get behind the wheel of their new car as soon as possible.

No pre-payment penalty

Most car loans in India do not have a pre-payment penalty, meaning borrowers can repay their loan early without incurring any additional charges.

Tax benefits

Borrowers may be eligible for tax benefits on the interest paid on their car loan.

Discounts and offers

Some lenders may offer discounts and offers on car loans, such as lower interest rates or processing fees.

Additional products and services

Some lenders may offer additional products and services with their car loans, such as car insurance or roadside assistance.

Car Loan Approval – Steps to Get the Loan Approved Faster

Here are some steps you can take to get your car loan approved faster:

Check your credit score

Your credit score is one of the most important factors that lenders will consider when evaluating your loan application. A good credit score will show lenders that you are a responsible borrower and that you are likely to repay your loan on time. You can check your credit score for free online.

Shop around and compare offers from different lenders

Different lenders may offer different interest rates, terms, and fees for car loans. It is important to shop around and compare offers from multiple lenders before you choose a loan.

Get pre-approved for a loan

Getting pre-approved for a car loan is a great way to speed up the loan approval process. When you are pre-approved for a loan, the lender will have already reviewed your credit and financial information and given you a preliminary approval for a loan amount and interest rate. This will give you an idea of how much you can borrow and how much your monthly payments will be before you start shopping for a car.

Have down payment ready

A down payment will show lenders that you are serious about buying a car and that you are able to afford the loan. A larger down payment will also reduce the amount of money you need to borrow and make your loan more affordable.

Be prepared to provide documentation

Lenders will typically require you to provide a variety of documentation when you apply for a car loan. This documentation may include proof of income, proof of employment, and proof of residence. It is important to have all of the required documentation ready before you start the loan application process.

Income Tax Benefits on Car Loans Taken to Purchase Electric Vehicles

The Indian government offers income tax benefits to individuals who take out car loans to purchase electric vehicles. This is part of the government’s efforts to promote the adoption of electric vehicles in the country.

Under Section 80EEB of the Income Tax Act, 1961, individuals can claim a deduction of up to Rs. 1.5 lakh on the interest paid on a loan taken to purchase an electric vehicle. The deduction is available for loans taken out between April 1, 2019, and March 31, 2023.

To be eligible for the deduction, the following conditions must be met:

• The loan must be taken from a financial institution approved by the Reserve Bank of India.
• The electric vehicle must be registered in the name of the individual claiming the deduction.
• The electric vehicle must be used for personal purposes only.

The deduction is available for the entire duration of the loan, or until the loan is fully repaid.

To claim the deduction, individuals must file their income tax returns and attach the loan interest statement from the financial institution.

The income tax deduction on car loans for electric vehicles is a significant incentive for individuals who are considering purchasing an electric vehicle. It can help to reduce the cost of the electric vehicle and make it more affordable.

Foreclosing a Car Loan

When you get a car loan, you make monthly payments called Equated Monthly Instalments (EMIs) until you finish paying it off. But if you want to pay off the loan earlier than planned, it’s called “foreclosing” or “prepaying” your loan.

Most lenders allow loan prepayment, but they might charge a penalty fee for it. However, some lenders won’t charge you anything extra if you want to finish your loan early.

Foreclosing your car loan is a good idea if your income has gone up, and you want to get rid of the loan. It also means you won’t have to make those monthly EMI payments anymore. Plus, it gives you full ownership of your car because the “hypothecation” (a fancy word for a lien on the car) is removed.

But remember, some lenders might charge you a fee for this. So, always read the terms carefully before you decide to foreclose your loan.

Top up Loan on Your Car Loan

If you’ve already taken a car loan and find yourself needing extra money for things like a wedding, fixing up your home, or a medical emergency, you can get something called a “top-up loan” on top of your existing car loan. This means you can borrow more money, up to 150% of your car’s value. To qualify for a top-up loan, most lenders will want to see that you’ve been making your car loan payments on time for at least 9 months. The good news is that getting a top-up loan is quite speedy and doesn’t involve a lot of paperwork. Some banks that offer these top-up loans include HDFC Bank, Axis Bank, and Kotak Mahindra Bank.

Car Refinancing

Car refinancing is when you get a new loan to replace your current car loan. People do this to get better loan terms, like lower interest rates or longer repayment periods, or to change the terms of their current loan.

People often refinance their car loans to save money. By getting a new loan with lower interest rates, you can reduce your monthly payments and save money. If interest rates have gone down, your financial situation has improved, or you can’t afford high monthly payments, car refinancing can be a smart move. It’s also a good choice if you feel you got a bad deal on your first car loan.

But, car loan refinancing may not be a good idea if you’ve already paid a lot of your original loan, your car’s value has dropped a lot, or if there are high penalties for early payment. It can also be a problem if you plan to get more loans later, as refinancing might hurt your credit score.

End Note

Car loans in India offer a number of features and benefits that can make them an attractive option for borrowers who are looking to purchase a new or used car. However, it is important to carefully consider your needs and budget before applying for a car loan. You should also shop around and compare offers from multiple lenders before you choose a loan. By following the tips provided in this article, you can increase your chances of getting the best car loan deal possible and getting your loan approved faster.

FAQs