Auto loan interest rates are crucial in determining if you can afford a new purchase. Public and private banks lend new and used cars at a specified interest rate (ROI) at equal monthly payments (EMI), either after down payment or fully financed, for both employees and self-employed.
One’s credit rating plays a crucial role in getting an attractive ROI on the amount borrowed, which means higher credit rating reduces ROI and vice versa, and is calculated based on tenure, loan amount as well as one’s relationship with the bank . Most banks also allow their existing customers to hold collateral and auto loans as a condition of lending.
Forbes Advisor India has compiled a list of car loan programs and the interest rates currently offered by public and private sector banks in India to help you better understand the types of plans that would suit your personal financial needs.
Interest rate of public sector banks
The Indian government has merged some public sector banks, therefore the interest rates of the merged banks will match those of the bank they are merging with.
The car loan interest rates of most Indian banks are as follows:
Bank of Baroda
Bank of India
Bank of Maharashtra
Central Bank of India
Indian Foreign Bank
Punjab & Sind Bank
Punjab National Bank
State Bank of India
Private bank interest rates for car loans
City Union Bank
IDFC First Bank
Karur Vysya Bank
Kotak Mahindra Bank
How do banks calculate interest rates on car loans?
Interest rates on car loans provided by public and private sector banks in India can be either fixed or variable. For loans, a fixed interest rate is set for the entire term of the loan. With a variable rate, the ROI of your simply equated monthly rate (EMI) is calculated using the “base rate” plus the standard premium rate and the lender’s repo-linked loan rate (RLLR) or marginal cost of unit-based lending rate (MCLR).
The ROI on car loans for each bank changes according to the change in the RBI’s repo rate (the rate at which the top bank lends money to public and private banks). However, with the floating rate, the change will be reflected after the “reset period” when your EMI’s interest rate undergoes revisions.
Car Loan: Things to Consider
- Although some banks offer loans against a credit score as low as 300, the minimum required credit score is 701.
- Some banks offer special ROI concessions to women and existing borrowers, as well as salaried account holders.
- When lending for used cars, most banks do not consider creditworthiness to be a mandatory requirement.
Frequently Asked Questions (FAQs)
What is a used car loan?
A used car loan includes monthly EMI payments for used car purchases and is cheaper than new cars.
How does a car loan work?
What is a credit score and is it important to get a car loan?
Should You Take Out a Car Loan?