5 Top Banks for Car Loans in India
Buying a brand new car is no longer a dream for most – it is in fact a necessity! Some people may choose to buy a car after a promotion or a salary hike while others may opt to do so to provide more comfort to their families or to commute to and from office. Whatever be the reason, buying a car is a substantial expense and as many of us are not able to pay the entire amount out of pocket, we have to shop around for and apply for a car loan. Even if you are rolling in cash, a car loan can help you retain your savings for emergencies or immediate financial needs, while allowing you to enjoy the comfort of a brand new car simultaneously.
With nearly all banks coming up with attractive offers, it becomes difficult for people to choose the best lender for their car loan. In the following sections, we have described some key comparison criteria when comparing car loan options provided by different banks. We have also included a short list of 5 leading banks that offer car loans in India.
- Down Payments: Most banks usually seek a 15% to 20% down payment also known as margin and people usually choose banks that offer the car loan with a lower margin. However, making a larger down payment is usually more beneficial for you in the long term. This will drastically reduce your payable EMI and you may also be able to negotiate better (i.e. lower) loan interest rates.
To illustrate, if you make a down payment of 40% on a car of Rs. 7 lakh (i.e. you pay Rs. 2.8 lakh), your EMI for a car loan at 12.5% and tenure of 5 years will come to Rs. 9,449/month which translated to a total interest payable of Rs. 1,46,948 over the whole loan tenure. Alternately, if you make only a 15% down payment, then, other things being the same (i.e. car price, interest and tenure) your EMI will be Rs. 13,386 and total interest payment will be Rs. 2,08,176 over the 5 year loan tenure, which is substantially higher.
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- Interest Rates and Tenure – This is a key factor you need to understand before you apply for any loan, including a car loan. Car loans are currently offered at floating rates however, different banks offer the same loan at different rates of interest. A lower interest rate is preferable as compared to a higher interest rate, however, in case of a longer tenure at a low interest rate, your interest outgo will be significantly higher. Hence, it is best to use a car loan EMI calculator to calculate your total interest payout before opting for a specific option.
- Credit History: You must have a good credit history to be eligible for a car loan. The best way to analyse your credit history is to check your credit score. If the score is equal or above 750 then there is a good chance that your car loan will be approved.
Based on the above criteria, the following is our list of top 5 banks for car loans in India*
|Bank||Interest Rates||Loan Amount||Processing Fees||Foreclosure Charges||Tenure|
|SBI||9.65% onwards||Up to 85% of on-road price||Nil||No foreclosure charges||Up to 7 years|
|PNB||9.40% to 9.75%||Up to 85% of on-road price||1% of loan amount subject to max. of Rs. 6,000||
||Up to 7 Years|
|Axis Bank||9.5% – 15%||Rs. 1 lakh onwards||Up to Rs. 5,500||10% of the principal outstanding till 6 months and 5% thereafter. Two-part payments allowed every financial year||Up to 7 Years|
|HDFC Bank||11.50% – 13.75%||Up to 100% of ex-showroom price||Up to Rs. 5,150||
||Up to 7 Years|
|ICICI Bank||10.75% – 12.75%||Up to 100% of ex-showroom price||Up to Rs. 5,000||
||Up to 7 years|
*The details provided in the list are indicative and liable to change from time to time.