Car Loan Overview

What is Car loan?

Car not only makes your life comfortable, but also reduces many difficulties. Coming to the office while battling public transport or going out for a weekend trip, everything becomes very easy.

Earlier, buying a car was a big deal for anyone, as a lump sum amount had to be spent for it, but now it has become very easy due to the easy availability of car loans.

Banks and non-banking finance companies offer car loans on easy monthly installments, making it very easy to buy a car now. This does not spoil your budget and also provides convenience.

When you buy a car by taking a loan, it is mortgaged with the lending company. This gives them the right to confiscate your property in case they are unable to repay your loan. If you are not able to pay the monthly installment on time, then they can pick up the car and take it away.

Hypothecation letter is also a part of the car registration process. Once you repay the loan, you can remove the hypothecation of the lending company from the registration papers.

Car loan for New and Used Cars

Lending companies offer loans on both cars, new and used cars. However, the interest rates on these two are different. The interest rates for new cars can range between 9.25% to 13.75%, while for used cars the interest rates range between 12.50% to 17.50%.

Car Loan Amount

The loan amount depends on your age and income. How much loan you get for the car depends on the lending company. At this time, usually you get a car loan up to four to six times your annual income.

Up to 80-90 per cent of the cost of the car gets financed. Some banks, however, finance up to 100%. It can be ex showroom price or on road price. 

Ex-showroom price

It's the amount paid to a dealer for buying a car. When you bring the car for plying on the road after paying registration charges, insurance, road tax etc., then it is the on road price.

When you go to take a loan for a second hand car, then the expenses incurred in re-registration are not covered.

Features Of Car Loan


Obtaining financing for the purchase of new and used cars.

Financing can be up to 85%-90% of the car's on-road value. Some banks offer financing of up to 100% of the car's on-road value under certain conditions.
The term of the loan can be ranges in between one year to seven years.
The loan amount can be up to three times of the applicant's annual income.
Some lenders offer instant auto financing facility.
If you choose to buy a vehicle from a bank-affiliated dealer or manufacturer, you can get additional discounts and offers.
The most common car loan repayment structure is monthly installments (EMI).

Process For Applying A Car Loan

The entire process of applying for a car loan is facilitated by banks for the benefit of the loan. These days, everything from applying to loan approval and disbursing online can be done by visiting banks in person. The entire application process works like this:

Filling in the Form – In the first step, the applicants are required to fill in the application form of their desired bank with all the vital details such as personal documents and other necessary documents.

Approval of loans – If the bank finds that all the documents are correct and finds that the borrower is able to repay the loan on time, it imposes a penalty on the loan amount within a short period of two days.

Document Verification - After submitting the loan application, all documents are sent to the banks. When the car is insured in the event of a loan, documents for this must be submitted.

Disbursing the loan amount – ​​The loan amount is given to the applicant after a specified period. In another way, banks offer a certain percentage of the money invested by the buyer in the purchase of their vehicle.

Eligibility Criteria For Car Loan

There are certain eligibility requirements to be met for a car loan, and one should make sure that they understand it properly. Let's see what are the  factors that will decide whether you are eligible to buy a car or not:

Details Salaried Self-employed
Age 21 – 60 years 18 – 65 years
Annual income ₹ 2.5 Lakh Min. turnover of ₹ 40 lakhs
Credit Score 700 700
Loan Tenure Up to 7 Year Up to 7 Year
Loan to Value Ratio Up to 100% Up to 100%

EMI Calculator & Schedule


Loan EMI


Total Interest Payable


Total Payment
(Principal + Interest)


Loan Eligibility Calculator


Car Loan Comparison Chart

LenderInterest RateProcessing FeeEMI / LakhLoan Tenure
7.40 %Min Rs 1000Rs 146607 Years Max
7.55 %0.25% of loan amountRs 1,5367 Years Max
7.70 %Min Rs 3300 Max Rs 47501,5447 Years Max
7.90 %Upto 0.23%Rs 147497 Years Max
8.65 %1.25% of loan amount +GST1,5917 Years Max
8.65 %Upto 1% of loan amount Rs 1,5915 Years Max
8.70 %Rs 500+GSTRs 1,5497 Years Max
8.75 %Min-1500 to Max-2500Rs 1,5967 Years Max
8.85 %Upto 0.50 of the loan amountRs 1,6017 Years Max
8.85 %Upto 1.00Rs 14,7107 Years Max
8.90 %0.25% of loan amountRs 1,6047 Years Max
9.00 %Upto 2.001,6097 Years Max
9.15 %Min Rs 3500 Max Rs 12000Rs 1,6177 Years Max
12.99 %Up to 2.5%Rs 1,81912 to 72 Months

Related Frequently Asked Questions

Yes, car loans are offered for already used cars. However, the interest rate for such a loan will be different from the interest rate for a new car. Although the loan will cover only the cost of the car, other costs like transfer of registration etc. will have to be borne by you.

Sometimes, paying off the loan early helps lenders pay less interest and, therefore, face prepayment penalties. Sometimes, paying off the loan early and bearing the costs of the prepayment penalty is a benefit because you save a little bit of interest.

The main disadvantage of a car loan or any loan product is that you have to be privileged in the form of interest and fees. Basically, you are buying money from a lender. Failure to comply with the terms and conditions laid down in your loan undertaking could cost you more than you expected.

A 786 credit score is great, but it could be even better. If you can raise your score to an exceptional range (800-850), you may be eligible for the best lending terms, including the lowest interest rates and fees, and the most attractive credit-card rewards programs.

Check your credit score and report regularly.

Don't miss payment.

Limit your credit usage.

Reduce your debt burden.

Avoid multiple loan/credit card applications in a short span of time.

Pay attention to the spending habits of your joint applicant

As the name suggests, a car loan is a loan given to an individual who wants to buy a car. So a car loan is a secured loan where the car you are buying acts as collateral. Thus, there are no additional requirements for collateral for car loans. However, you must have an RC (Registration Certificate) for the vehicle approved by the bank. This endorsement is canceled after the loan is fully repaid.

Car loan tenure ranges from 1 to 5 years. The shorter the loan term, the cheaper the monthly installments for longer car loan terms. Currently, a small number of lenders are involved in offering auto loans for longer tenures Under what circumstances can my car loan application be rejected?

If you have a bad credit score, have defaulted on your payments or have applied for a loan multiple times and been rejected, your loan application may be rejected. Also, you have to fulfill the bank's eligibility criteria like minimum income level, age, previous. Relationships with banks etc. for your loan approval of up to 7 years.

If you have a bad credit score, have defaulted on your payments or have applied for a loan multiple times and been rejected, your loan application may be rejected. Also, you have to fulfill the bank's eligibility criteria like minimum income, age, previous relationships with banks etc. for your loan approval.


News Update on Car Loan

Planning to buy a new car? Compare cheapest car loans ahead of festive time

Admin 2022-08-30 12:29:32

Indian markets are abuzz with the launch of many new cars with high-end features. With the festive time approaching, most of you may be planning to buy a new car. Here is what you should keep in mind before you make your purchase.

The first step in your car buying journey is selecting a vehicle. It would be best to compare different vehicles and prices before finally buying one. Purchasing a vehicle based on your budget and usage requirements is also important.


Key things to consider while taking a car loan; Check lowest interest rates & EMIs

Admin 2022-11-15 12:46:23

The year-end is the best time to buy a new car. It is when heavy discounts are offered on the vehicles to customers before the new stock comes to showrooms. If you are planning to buy a new car, this could be the best time to ask for discounts from car companies.

Once you select a car based on your budget and comfort, the second thing that comes to mind is funding. Often people need a car loan to purchase their favourite vehicles. Here are a few things you must take into consideration when you decide to apply for a car loan.

Steps to take if your loan application is rejected

Admin 2023-12-27 12:39:10

Loan application rejections can stem from various factors. Commonly, inconsistencies or delays in debt payments stand out as primary reasons. Additionally, lack of awareness about how a negative credit history impacts loan approvals can lead to rejections. If you’ve recently faced rejection, it’s crucial to understand the causes and take corrective action.

Monitoring the impact of these rejections on your credit score is vital as multiple rejections can worsen your score, requiring months or even years for recovery. Here are steps to take if your loan application has been declined:

Identify the Cause

Discover why your application was rejected. Lenders often provide reasons, enabling you to rectify the issue to enhance eligibility. For instance, securing a guarantor might bolster your chances. Rejections can result from various factors like a low credit score (below 700), insufficient income, existing loans, late or non-payments on prior loans, problematic job history, or legal complications related to pledged assets. Errors in your credit report, such as your PAN being mistakenly linked to someone else’s loan default, can also trigger rejection. Understanding the specific reason is crucial for improving your credit standing.

Timely Debt Payments

Ensuring punctual payment of EMIs and debts is crucial for maintaining a healthy credit profile, reducing the likelihood of loan rejections. A credit score above 750 opens doors to the best loan offers. If a low credit score caused the rejection, focus on improving it. Prompt and complete repayment of your dues gradually elevates your credit score. Additionally, maintain a low credit utilisation ratio (CUR) and avoid closing existing credit cards or applying for new ones to prevent adverse effects on your score.

Debt-to-Income Ratio Assessment

Lenders have access to your pending loans and might request bank statements to evaluate the portion of your income dedicated to EMIs. They generally prefer borrowers not allocating more than 30%-40% of disposable income to loans. If your current commitments reach or exceed this threshold, securing new loans may be challenging, potentially resulting in rejection. A higher disposable income is favourable in such cases.

Documentation Accuracy

Ensure accuracy and consistency in essential details like name, address, signature, PAN, Aadhaar, and other documents required for loan applications. Mismatches in these non-financial aspects can lead to unnecessary rejections, undermining your chances of loan approval.

Limit Frequent Applications

Each time you apply for a loan or credit card, the lender conducts a ‘hard’ inquiry into your credit history. These inquiries marginally reduce your credit score. Therefore, multiple loan applications within a short period can significantly damage your credit score. Repeated rejections often indicate a pattern, making subsequent applications less likely to succeed. To safeguard your score and avoid further rejection, refrain from making numerous loan applications. Additionally, multiple hard checks signal an eagerness for credit, which can raise concerns for lenders.

Monitor Your Credit Score Regularly

Monitoring your credit score monthly is essential to stay informed about changes caused by payments, delays, or defaults on loans. Obtaining a free monthly credit report from Experian or CIBIL offers a comprehensive overview of your credit activity, payment history, and loan status. This snapshot of your financial health allows you to track your score’s progress and make informed decisions to enhance it. Regular monitoring also helps detect discrepancies or errors that could harm your score, allowing you to address these issues with the relevant credit bureau.

Reapplying as Your Score Improves

Recovering from the impact of loan rejections may take time to restore your credit score. However, if your score is already good, the time needed for improvement is usually shorter. Consistent debt payments and responsible credit behaviour contribute to enhancing a damaged score.

Hope these tips will help you make your case stronger and expedite your loan approval process.

whastapp call us