If you are planning to buy a new car, you should explore and compare the prices of
different models in the market and choose a car according to your utility and affordability.
Once you have chosen the right car, financing is the next step. There are plenty of car
loans available in the market, and to get the best one, you should check the interest
rates offered by different lenders and banks.
Factors influencing interest rates on car loans
A lot of lenders available in the market offer car loans. The interest rates for car loans in India start at 6.65% per annum. One of the mostimportant factors that influence car loan interest rates is your credit score. Here are
some other key aspects:
• Credit score and credit report are the first two things that are evaluated by the
lender while giving car loans. The credit score needs to be more than 750 to
easily avail of a car loan.
• Income: Your income might also be one deciding factor for availing of a loan.
The income decides the repayment capacity and also the interest rates at which
the loan will be given.
• Loan amount: The interest rates will depend upon the loan amount that is
sanctioned by the lender. The higher the loan amount, there are chances that the
interest rates will be lower.
• Repayment tenures: The longer your loan tenure, the lower your interest rate
will be. However, with a long loan tenure, you will end up paying more
in interest over the years. A shorter loan tenure means a higher interest
rate. To decide your loan tenure, you should calculate the total interest
outgo for the loan. You should finally choose a repayment tenure in
which the total interest paid is less and not get lured by the lower EMI.
Comparison of Interest Rates From Different Banks
Name of the Bank Interest Rate (p.a.)
State Bank of India 7.20% onwards
Indian Overseas Bank 7.55% onwards
Jammu Kashmir Bank RLLR + 0.75% onwards (floating)
RLLR + 1.50% onwards (fixed)
Canara Bank 7.30% onwards
HDFC Bank 7.95% onwards (Rack Interest)
Karur Vysya Bank 7.80% onwards
South Indian Bank Repo Rate + 5.10%
IDBI Bank 7.35% onwards (floating)
Yes Bank Contact the bank
Karnataka Bank 8.05% onwards
Federal Bank of India 8.50% onwards
Tamilnad Mercantile Bank 8.25% onwards
Punjab National Bank 6.65% onwards
Union Bank of India 7.40% onwards
Types of Car Loan Interest Rates
The car loan interest rates are fixed or floating in nature. A fixed interest rate is one
which remains constant throughout the tenure of the loan. A flexible interest rate keeps
on changing according to the trends in the financial markets.
The difference between the two interest rates can be seen below
Fixed interest rate Floating interest rate
Interest rate is higher Interest rate is lower
EMIs will remain constant EMIs will change according to MCLR changes
Comes with lower risk Comes with higher risk
Easy to prepare budgets with these rates Tough to maintain budgets as rates keep
Offers security to borrowers Offers savings to borrowers
Good for a short loan tenure (3 to 10
Good for a long loan tenure (20 to 30 years)
Fixed Interest Rates
A fixed interest rate remains fixed throughout the tenure of the loan. A fixed interest rate
is chosen when you know that the financial markets are not performing too well and may
not perform very well in the near future. It is advisable to go for a fixed interest rate if you
feel that there may be an increase in the interest rates in the coming future. If you feel
that the financial market may not go down below a particular level, then fixed interest
rates should be chosen.
Floating Interest Rates
Floating interest rates are generally cheaper than fixed interest rates. These interest
rates change according to market trends. When the base or the MCLR rate changes, the
floating rate gets affected in the market. In this case, if the floating rate changes, the
EMIs may also go up and it might affect your financial budget. On the other hand, if the
rate goes down, you end up saving money.
Latest Car Loan Interest Rates
Name of the
Interest Rate (p.a.) Loan Amount Processing Fee
Union Bank of
7.40% onwards Up to Rs.125 lakh 0.25% to 0.50% of the loan
IDBI Bank 7.35% onwards
Up to Rs.25 lakh –
Axis Bank 7.45% onwards Rs.1 lakh onwards Rs.3,500 to Rs.5,500
State Bank of
7.20% onwards Up to 48 times of
Nil (Until 31 January 2022)
RLLR + 0.75%
RLLR + 1.50%
Rs.50 lakh 0.5% of loan amount Min:
7.30% onwards Up to 90% of the car’s
0.25% of loan amount Min:
Rs.1,000 Max: Rs.5,000
8.50% onwards Up to 100% of the
Rs.1,500 to Rs.2,500
7.00% onwards Rs.1,500 (plus GST) 0.5% of loan amount Max:
Bank of India
6.85% onwards Rs.200 lakh 0.25% of loan amount
If you have a good Credit report check score, a good source of income and a good relationship with
the bank, there are chances that you can get a good deal for interest rates on car loans.
Lenders will offer both fixed and floating rates. One should thoroughly evaluate both the
conditions and the financial trends and take a decision on borrowing.