Vehicle Loan

Car finance/Car Loan interest rates are expressed as an annual percentage rate, or APR, and are determined by a number of criteria, including your income, debt, and credit score. The interest rate on a car loan majorly depends on your CIBIL score. To find out how much interest on a car loan is applicable, please contact us.

The bank takes a holistic view of the car loan application. The CIBIL stand alone is not the criteria. However, a higher CIBIL score is considered good. The minimum cut-off for a CIBIL score is 701 at present.

The following people are eligible to apply for a New Car Loan:

Salaried Individuals:​​​​​​​

• This includes employees of private limited companies, employees from public sector undertakings, including central, state and local bodies
• Individuals who are a minimum of 21 years of age at the time of applying for the loan, and no older than 60 at the end of the loan tenure
• Individuals who have had a job for at least 2 years, with a minimum of 1 year with the current employer
• Those who earn a minimum of Rs. 3,00,000 per year, including the income of the spouse/co-applicant
• Individuals who have a telephone/post-paid mobile

Self Employed Individuals and Professionals (Sole Proprietorship):

• This includes self-employed sole proprietors in the business of manufacturing, trading or services
• Individuals who are a minimum of 21 years of age at the time of applying for the loan, and no older than 65 at the end of the loan tenure
• Those who have been in business for a minimum of 2 years
• Should earn at least Rs. Rs. 3,00,000 per annum

Self Employed Individuals and Professionals (Partnership Firms):

• This includes self-employed partners in the business of manufacturing, trading or services
• Those who have a minimum turnover of Rs. Rs. 3,00,000 per annum

Self Employed Individuals and Professionals (Private Limited Companies):

• This includes individuals who own a private company in the business of manufacturing, trading or services
• Should earn at least Rs. Rs. 3,00,000 per annum

Self Employed Individuals (Public Limited Companies):

• This includes directors in public limited companies that are in the business of manufacturing, trading or services
• Should earn at least Rs. Rs. 3,00,000 per annum

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

• It helps you purchase a car even if you don’t have all the money for it right now.
• Most car loans will finance the on-road price of the car.
• Some car loans will even finance 100% of the on-road price. This means no down payments.
• With some banks offering financing in the crores, you are not limited in your choice of cars
• Most car loan offerings in India are secured loans. This implies that the car serves as the security/collateral for the loan.
• Procuring a car loan is usually simple when compared to other loan products. Individuals with slightly unsavoury credit scores can also hope to procure one. However, this option differs from bank to bank.
• Car loans in India often offer fixed interest rate options. This means, you are always assured of a fixed amount that needs to be repaid monthly.
• Many lenders will offer interest rates based on your credit score so a high score to get you a cheaper loan.
• Car loans are not meant for just new cars. A used car loan can help you buy a pre-owned car.

If, after taking a car loan, you need quick or additional funds for purposes such as a wedding, home renovation, medical emergency, etc., you can get a top-up loan on your existing car loan. You can avail up to 150% of the car’s value as a top-up loan. Most lenders that offer a top-up on their car loans will require you to maintain a clear payment record for at least 9 months. The process to avail a top-up loan on your existing car loan is quick and requires minimal paperwork.

Some of the banks that offer top-up on their car loans are HDFC Bank, Axis Bank, and Kotak Mahindra Bank.

When you take a new loan to pay off the outstanding balance on your existing car loan, it is known as car refinancing. You can choose to refinance your car loan if you wish to replace your current loan with better features such as low interest rates, extended repayment tenures, etc., or simply to change the terms of your current loan. The most common reason why people refinance their car loans is to save money. When refinancing a car loan, you can avail a new loan that offers lower interest rates which, in turn, will save you money. You can also lower the equated monthly instalments (EMIs) by choosing a longer repayment tenure with a new lender through car refinancing.

Car refinancing is a good idea when there has been a drop in interest rates since you took the original car loan, your financial condition has improved, you are unable to bear the burden of high EMIs, and if you feel you did not get a good deal on your car loan the first time around. However, refinancing on a car loan does not make sense when you have already made a substantial repayment of your original loan, your car value has depreciated, the prepayment penalties are high, and when you have plans to apply for new loans in the future as refinancing may impact your credit score negatively.

The maximum amount of loan that you can avail to buy a car will vary from lender to lender. Most banks offer financing up to 90% of the on-road price of the car but there are some banks such as HDFC Bank, etc., that offers financing for up to 100% of the car’s on-road price.

Yes, you can prepay the entire car loan and save on vital interest payments in the future. However, most banks will allow the pre-payment option after you have chalked off 6 months on your loan tenure. Plus, you will be expected to pay a small fee as pre-payment penalty that will be dependent on the leftover loan amount.

Unless otherwise specified, almost all small to medium sized cars, Commercial Vehicle Loan, Sports Utility Vehicles (SUV), and Multi Utility Vehicles (MUV) come under the purview of car loans available in India. However, as mentioned, refer to the loan brochure for exceptions to this rule.

Almost all car loan products available in India are secured loans, with the procured vehicle itself acting as the customary security. Most lenders in India will not insist upon any guarantors; however, if your annual income does not match up to the expected requirement, then you may be expected to sign-up a co-applicant and/or guarantor.

Repayment tenures usually range from 12 months to 84 months (1-7 years).

Just like with most loans, a high credit score above 750 is ideal. But you can still apply for a loan if your credit score is above 600. Remember, if your score is too low, your application may be rejected.

Yes. Some banks will offer lower interest rates to applicants with high credit scores. Likewise, borrowers with low credit scores will have to bear higher interest rates.

When you apply for a car loan, lenders will look for a credit score of at least 750. Below this score, lenders may be reluctant to lend to you as it indicates your low repayment capacity. Some banks may offer you a car loan despite your low credit score but they may charge a higher interest rate.

Before you apply for any car loan, ensure that you explore all the options available. Once you explore, you will get an idea about the benefits offered by various lenders on their car loans. Compare the benefits offered and pick a lender that fits your requirements. Whether it is a bank or a car dealership, pick the one that offers better interest rates.

Yes. Many top lenders such as SBI, HDFC Bank, etc., offer loans to buy used cars. These lenders offer car loans for up to 85% of the car’s value provided that the car is not more than 5 years old. Used car loans can be repaid in a maximum of 7 years.

One of the most important factors that lenders consider before offering you a car loan is your credit score. As stated above, a credit score of above 750 can fetch you lower interest rates and other benefits. The other factors that lenders look for when you apply for a car loan are your employment status, residence and job stability, income, debt-to-income ratio, etc.

The amount of EMI (equated monthly instalments) that you will be paying towards your car loan will depend on the interest rate, loan amount, and the repayment tenure you choose. You can calculate the EMI by using the EMI Calculator tool available on the BankBazaar website. For example, let us suppose that you avail a car loan of Rs.1 lakh at an interest rate of 12% for a tenure of 5 years. Using the tool, we calculated the EMI and found it to be Rs.2,224.

Making a higher down payment will mean that you will need to avail a lower loan amount to buy a car. When you avail a lower loan amount, there are chances that banks or lenders may offer you a car loan at lower interest rates. This is simply because if the loan amount is lower, the repayment will be quicker. So, though there is no hard and fast rule to how much down payment you should make, a higher down payment will ensure that your debt liability is lesser.

If your credit score is above 750, you can negotiate with the banks to offer you a car loan at a lower interest rate. Many lenders will let you negotiate on the interest rates since your high credit score is an indication of your high repayment capacity. Some lenders may also offer you a waiver on the processing fee if you have a good credit score.