Interest rates on car loans are crucial in determining whether you can afford to buy a new one. Public and private sector banks provide loans for new and used cars at a certain rate of interest (ROI) on equivalent monthly installments (EMI), after down payment or full financing, to employees and the self-employed.
Credit score plays a vital role in getting an attractive return on investment on the sum borrowed, which means the higher your credit score, the lower the return on investment and vice versa, and is calculated on the basis of the seniority, the amount of the loan as well as its relationship with the bank. Most banks also allow their existing customers to keep collateral, as well as loans against cars, as a condition of obtaining a loan.
Forbes Advisor India has compiled a list of car loan programs and interest rates currently offered by India’s public and private sector banks to help you better understand the types of plan that would suit your personal financial needs.
Auto loan interest rates in 2022
The above auto loan interest rates and processing fees are updated as of November 16, 2022. While we update this information regularly, the interest rate and loan details may have changed since the last page update.
Related: Best car loan in India 2022.
How do banks calculate interest rates on car loans?
Auto loan interest rates from public and private sector banks in India can be fixed or floating. A fixed interest rate on the loans is fixed for the entire term of the loan. With a variable rate, the ROI of your Easy Monthly Installment (EMI) is calculated based on the “base lending rate” plus the standard premium rate, and the lender’s repo-linked lending rate (RLLR) or the marginal cost of fund-based lending. rate (MCLR).
The ROI of car loans for each bank changes depending on the change in the RBI repo rate (the rate at which the apex bank lends money to public and private banks). In the variable rate, however, the change is reflected after the “reset period” when the interest rate on your EMI is subject to revisions. Nevertheless, banks usually provide the breakdown of the EMI against the outstanding amount in your car loan sanction letter.
For a borrower who applies for a new car loan of INR 10 lakh with an ROI of 10.5% for a term of up to 10 years, the simple interest formula will be used to calculate the interest on this sum to calculate your Monthly IME.
The procedure is as follows:
E = PXRX (1+R)N/(1+R)N–1)
Where, E = EMI; P = Principal amount; R = interest rate; N = Seniority in months.
EMI = INR 1000000 X 0.00875 X (1 + 0.00875)120 / (1 + 0.00875)120 – 1) = INR 13493.
What You Should Know About Auto Loans: Features and Benefits
Eligibility criteria: The minimum age of the borrower must be between 21 and 70 years old (60 years old in some banks). The annual income of a salaried borrower must be at least INR 3 lakh per year, while self-employed borrowers must earn INR 2.5 lakh per year.
Processing fee: Depending on the banks, the processing fee ranges can be zero and up to 4%. Remember that banks also charge other fees, such as documentation fees, etc.
Foreclosure and Partial Payment: If a borrower wishes to close the loan before the term, an additional ROI is deducted from the outstanding principal amount.
On-road financing: Depending on your relationship with the bank, your credit score and your credit history, banks can lend from 70% to 95% of the value of the car, including RTO and insurance costs. The remaining balance must be paid by the borrowers. Some banks also offer 100% car financing.
How to register: Banks have made it much easier for borrowers to apply for a car loan online. Borrowers can get price quotes for a selected car from the list of makes and models on the bank’s website. Here is the car loan application process provided by major Indian banks. However, if you have already selected the car, you may need to call the bank’s toll-free number or go to the nearest bank branch to apply for a car loan giving the vehicle and dealer details automobile.
Remember to take with you the relevant documents necessary to prove your identity, address and income. In the case of old cars, additional documents are requested by banks to assess maintenance records, registration certificate, car insurance, bonus-malus transfer, etc.
Frequently Asked Questions (FAQ)
What is a used car loan?
A used car loan is to make monthly EMI payments to buy used cars and they are priced lower than new cars.
How does a car loan work?
Why is credit score important for getting a car loan?
When should you take out a car loan?
Fixed or floating: which interest rate is better?
Which banks offer good interest rates to female borrowers on car loans?
Is the credit score mandatory for the purchase of used cars?
Which Indian banks provide loans for the purchase of a new electric vehicle?
What documents are needed to apply for a new car loan from banks?
What documents do I need to present to apply for a car loan from the banks?
What is the maximum amount of car loan offered by banks?
Which banks offer the best auto loans in India?
What is the maximum time for approval of a loan?
Can I close the car loan before the term?
What does the road price of the vehicle mean?
How can I get a car loan at lower interest rates?