Comprehensive Guide to Understanding Car Loan Interest Rates in India By Different Banks: Comparison, Types, Factors, and FAQs -

e you thinking of purchasing a car this year? If yes, then about the different car loans offered by the banks or Non-Banking Financial Companies (NBFCs). Every bank gives its car loan interest rate as per loan amount, tenure, credit score and the type of interest rate. Card loans start from 8.70% p.a. Well, the process to apply for a car loan is very simple with every bank. Just the car loan interest rate is the thing that you should consider. Here is the list of interest from the different banks.

Best Car Loan Interest Rates in 2024:-

Here are the best car loan interest rates offered by leading banks across India:

State Bank of India

Interest Rate: 8.75% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,596 onwards

Indian Overseas Bank

Interest Rate: 8.85% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,601 onwards

Jammu Kashmir Bank

Interest Rate: RLLR + 0.75% p.a. onwards (floating), RLLR + 0.25% p.a. onwards (fixed)
EMI for Rs.1 lakh for 7 years: Contact the bank

Canara Bank

Interest Rate: 8.70% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,594 onwards

HDFC Bank

Interest Rate: 8.95% p.a. onwards (Rack Interest)
EMI for Rs.1 lakh for 7 years: Rs.1,608 onwards

ICICI Bank

Interest Rate: 9.10% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,614 onwards

Karur Vysya Bank

Interest Rate: 9.55% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,637 onwards

South Indian Bank

Interest Rate: Fixed: 8.75% p.a. onwards, Floating: 9.27% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,596 onwards(Fixed), Rs.1,623 onwards(Floating)

IDBI Bank

Interest Rate: 8.80% p.a. onwards (floating), 8.80% p.a. onwards (fixed)
EMI for Rs.1 lakh for 7 years: Rs.1,599 onwards

Karnataka Bank

Interest Rate: 8.88% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,611 onwards

Federal Bank of India

Interest Rate: 8.85% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,601 onwards

Tamilnadu Mercantile Bank

Interest Rate: 10.70% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,697 onwards

Punjab National Bank

Interest Rate: Floating: 8.75% p.a. onwards, Fixed: 9.75% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,596 onwards (Floating), Rs.1,647 onwards(Fixed)

Union Bank of India

Interest Rate: 8.70% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,594 onwards

Axis Bank

Interest Rate: 9.25% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,619 onwards

Bank of Baroda

Interest Rate: Fixed: 8.80% p.a. onwards, Floating: 8.80% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,599 onwards

Bank of India

Interest Rate: 8.75% p.a. onwards
EMI for Rs.1 lakh for 7 years: Rs.1,596 onwards

Types Of Car Loans:

As you see, banks provide an interest rate for fixed and floating car loans. There are two types of car loans: fixed and floating (or variable). Here’s an overview of each type:

Fixed Interest Rate Car Loan

In this car loan, the interest rate remains constant throughout the loan tenure.
The borrower knows the exact amount they have to pay every month to the bank. It is easy to make the budget.
These types of car loans provide stability and protection against interest rate fluctuation in the market.
If the market interest rate decreases, the borrower misses the chance to potentially save some amount.

Floating Interest Rate Car Loan

In this car loan, the interest rate is tied to a benchmark interest rate, such as the repo rate set by the central bank.
The interest rate fluctuates periodically as per the benchmark rate. There is no fixed amount to pay through the loan tenure.
There is profit in the floating car loan when the market interest rate decreases. Hence, floating-rate loans may benefit from lower interest costs and reduced monthly payments.
If the market interest rates rise, it means higher interest costs and increased monthly payments.
It offers potential savings when the market interest rates decrease.

Choosing between a fixed car loan or a floating card loan is very confusing. Although, it is an individual’s personal choice to tolerate the risk or not. One who wants a stable monthly payment then chooses a fixed interest rate car loan.

Factors Affecting Car Loan Interest Rates

1. Credit Score:

The person must make sure that he has a good credit score and qualifies for the eligibility criteria specified by the bank, as the bank can reject the loan application if you do not have a good credit score or history. A higher credit score is also linked to a lower interest rate because it shows your financial reliability.

2. Regular payments:

The first payment is the amount paid by the customer as a percentage of the total amount of the car to be purchased, and this payment affects the comprehensive interest and monthly amounts due, i.e. the cost of the loan. The monthly payments are what the person must pay regularly for the coming years, and he must ensure that there is no difficulty in making those payments regularly.

3. Interest Rate:

Interest rates on a car loan may vary, so you should make sure to make a good comparison between different banks or lenders before making the final decision, as interest rates can affect the final price of the car, noting that interest is applied to long-term loans, and it is best to limit The loan term is in a shorter period.

4. Loan Period:

You can choose to pay the loan over different periods, which is an option that the lender provides to the customer. Generally, the payment period can vary from one to six years, and the cost of the loan must be calculated based on the period that the borrower chooses, and by his financial capabilities and ability to repay.

5. Closure Penalties:

You should check whether the bank has any fees for closing or early repayment of the loan before applying for financing, as this is the only way to know if there are any hidden fees associated with the loan.

6. New transaction fees:

Loan applications can be accompanied by new processing fees imposed by banks, so it is best to choose a bank that charges low fees, and other fees, such as late payment fees, should also be checked.

FAQs:-

What is a fixed interest rate car loan?
- A fixed interest rate car loan maintains a constant interest rate throughout the loan term.
What is a floating interest rate car loan?
- A floating interest rate car loan’s interest rate fluctuates based on a benchmark rate like the repo rate.
Which banks offer the lowest car loan interest rates in India?
- Banks like State Bank of India, Canara Bank, and Union Bank of India offer competitive rates.
How does a borrower’s credit score affect car loan interest rates?
- A higher credit score typically results in lower interest rates as it reflects financial reliability.
What role do regular payments play in car loan interest rates?
- Regular payments ensure ease in managing the loan and can impact the total cost of the loan.
What factors should I consider when comparing car loan interest rates?
- Consider interest rates, loan period, closure penalties, processing fees, and other associated costs.
Can I choose the loan period for a car loan?
- Yes, loan periods typically range from one to six years, allowing flexibility based on financial capabilities.
Are there penalties for closing or repaying a car loan early?
- Some banks may charge closure penalties, so it’s crucial to check for such fees before availing the loan.
Do car loan applications come with processing fees?
- Yes, banks may impose processing fees, so it’s advisable to compare fees across different lenders.
How do interest rates impact the final cost of the car?
- Interest rates influence the total amount payable over the loan tenure, affecting the overall cost.
Can I negotiate car loan interest rates with banks?
- While negotiation is possible, it depends on various factors like creditworthiness and existing offers.
What should I prioritize, a lower interest rate or shorter loan period?
- Consider your financial situation; a shorter loan period may result in higher EMIs but lower overall interest payments.
Are there any government schemes or subsidies for car loans in India?
- Some schemes like the Pradhan Mantri Awas Yojana offer subsidies, but they’re specific to housing loans.
How do economic factors influence car loan interest rates?
- Economic conditions, inflation rates, and central bank policies can impact interest rates.
Can I switch from a fixed to a floating interest rate or vice versa during the loan term?
- Some banks may allow switching between fixed and floating rates, subject to terms and conditions.
Are there specialized car loan options for electric or hybrid vehicles?
- Some banks offer specialized loan schemes or incentives for eco-friendly vehicles.
What steps can I take to improve my chances of securing a lower interest rate?
- Maintain a good credit score, compare offers, negotiate terms, and consider making a higher down payment.
How do I calculate EMIs for different car loan options?
- Online EMI calculators provided by banks or financial websites can help estimate EMIs accurately.
Is it advisable to opt for a longer loan period to reduce monthly EMIs?
- While longer loan periods result in lower EMIs, they may lead to higher overall interest payments.
Can I avail of a car loan without a credit score?
- Some lenders offer car loans to individuals with no credit history, but terms and interest rates may vary.

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