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
6.50 %Min Rs 3300 Max Rs 4750Rs 203265 Years Max
7.40 %Upto 1.00Rs 146407 Years Max
7.55 %Rs 146477 Years Max
7.65 %Upto 0.20Rs 146527 Years Max
7.70 %Rs 146557 Years Max
7.70 %Upto 0.75Rs 146557 Years Max
7.80 %Min Rs 1000Rs 146607 Years Max
7.85 %Upto 2.00146627 Years Max
8.00 %Upto 5.0Rs 204025 Years Max
8.10 %Min Rs 2500Rs 146747 Years Max
8.20 %Min Rs 3500 Max Rs 7000Rs 146797 Years Max
9.65 %Upto 0.22Rs 147497 Years Max
10.49 %Up to 2.5%Rs 1,87712 to 72 Months
13.75 %Upto 0.50Rs 149487 Years Max

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.

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