Car Loan in India 2025

Note: Interest rates will differ from one bank to another. This makes it critical to compare interest rates before choosing a best auto loan to apply for.

Types of Car Loans

The different types of car loans are mentioned below:

1. New Car Loan: New car loans can be used to purchase a brand-new car straight out of the showroom. Depending on the bank, the interest rates will vary. Up to 100% of the on-road price of the car may be provided as a loan.
2. Used Car Loan: Lenders offer used car loans up to 80-85% of the price of the car at attractive interest rates for a loan tenure up to 5 years. However, certain lenders will offer loans for cars that have been purchased within the last 5 years.

1. Loan against Car: When one is in dire need of funds, he or she can pledge his or her old car as collateral in order to obtain sufficient funds to purchase a new car. This is known as Loan against Car. If you have a bad credit score, you can pledge your old car to the bank as collateral to obtain some much-needed funds.

Car Loan Tips: Save Money and Get Approved Faster

It is vital that you maintain a good credit score when applying for an auto loan. Apart from the loan getting approved quicker, lenders will offer low interest rates if your credit score is good.

No security or collateral is required when availing a car loans. The car acts as the security.

Key Components of a Car Loan

The main components of a car loan are as follows:

1. Monthly Instalments: The EMI that must be paid every month. EMI consists of interest and principal amount.  
2. Down Payment: The upfront amount paid when you purchase the car.  
3. Loan Term: The tenure or duration of the loan. EMIs must be paid for the selected tenure.  
4. Rate of Interest: The interest rate charged by the lender on the Vehicle loan that has been availed.
5. Principal Amount: The amount that is borrowed to buy the car. The principal amount does not include any fees or interest levied by the bank.

How to Apply for a Car Loan

Online

Most lenders provide the option to apply for a car loan online and the process is mentioned below:

1. You will need to visit the official website of the lender to apply for a loan.

1. Select ‘Apply Now’ under the car loan section.

1. Enter the relevant details.

1. The documents can be uploaded.

1. A customer service representative will call you to process the request.

You can visit the bank branch and apply for a car loan. The relevant documents must be submitted. Once the verification process is completed, the loan will be provided.

Offline

You can visit the bank branch and apply for a car loan. The relevant documents must be submitted. Once the verification process is completed, the loan will be provided.

Eligibility Criteria to Avail a Car Loan

The car loan eligibility criteria can be different for different banks. The common criteria are as follows:

1. The Age of the individual must be between 18 years and 75 years.
2. Minimum net monthly income of Rs. 20,000.
3. At least one year of employment with the current employer.
4. Must be salaried or self-employed, working for a government establishment or a private company.

Documents Required to Avail a Car Loan

To prove your eligibility, you'll need to provide certain documents. Though this too is specific to different lenders, the common documents will be:

Note: Make sure you check exactly what documents the lender wants. The documents required can change depending on your situation too. The documents required to take a used car loan are the same as above.

Checklist to Follow While Applying for a Car Loan

Car Loan EMI Calculator

In case you wish to avail a car loan to purchase a four-wheeler, you can use BankBazaar’s car loan EMI calculator to check the monthly payments. The calculator is easy to use and only basic details such as the loan amount, processing fee, tenure, and interest rate must be entered. Once the details have been entered, results are displayed immediately, hence, saving time.

Some of the main advantages of using BankBazaar’s car loan EMI calculator are mentioned below:

1. A complete break-up of the amount that needs to be paid will be provided.
2. Your budget can be planned as you will know the EMIs.
3. Accurate results are provided.
4. Helps in saving time as results are displayed immediately.

How to Calculate Car Loan EMI?

The Equated Monthly Installments (EMIs) that you will pay will depend on a few key factors.

The EMI for any type of loan is essentially calculated using a formula. The formula is as follows:

E = P x R x (1+R)^n / {(1+R)^n – 1}

where ‘E’ stands for the EMI you owe,

‘P’ stands for the principal amount,

‘R’ stands for the interest rate applicable to your car loan,

and ‘n’ stands for the tenure of the car loan (in months).

1. The loan amount.
2. The interest rate that is applicable to the loan.
3. The tenure of the loan.
4. The processing fees.

The higher the loan amount, the higher your EMI will be. Similarly, the shorter the loan tenure the higher the EMI. To find the best compromise between an affordable EMI and duration you should check out our car loan EMI calculator.

Choosing the Right Car Loan

1. Compare: BankBazaar.com can help you compare the various vehicle loan options available to you.
2. Interest Rate: Choose a loan that offers you the best interest rate along with the loan amount you need.
3. Keep it Simple: Choose the car before applying for the loan and make sure the cost of the car fits your budget.
4. Hidden Fees and Charges: Sometimes what appears obvious will have a hidden component. It is important to check for any hidden fees and charges.
5. Special offers: There could be special offers available when you are applying for your loan. Make sure you take advantage of them.
6. Insurance: Check the insurance premium for the car as this is a recurring cost.

Features & Benefits of Car Loans

When it comes to car loans in India, in general, the following features and benefits are offered. Note that the following is a generalised look at the advantages offered by car loans. Individually, lenders may have highly customized and specialized offers for their customer base.

1. Car loans in India help you purchase a car even if you don’t have the full amount upfront. 

1. Most lenders finance the entire on-road price, often with no down payment required. 

1. Some banks offer loans in crores, giving you wide freedom to choose your car. 

1. Car loans are usually secured loans, with the car serving as collateral. 

1. Procuring a car loan is simpler compared to other loans, and even those with lower credit scores may qualify (varies by lender). 

1. Many loans offer fixed interest rates, ensuring predictable monthly payments. 

1. Interest rates are often based on your credit score - higher scores can get you cheaper loans. 

1. Car loans are available for both new and used cars.

A good credit score can help you secure lower interest rates on loans and credit cards.

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