Best Car Loans in India 2021

Whether you're buying a new car or used vehicle, choosing an auto loan lender is one of the first steps to securing your dream four-wheeler. To help you find the best deal and minimise your total cost of borrowing, our team has put together the best car loans in the market based on interest rates, processing fees and other important factors like eligibility criteria.

Table of Contents

Lowest Car Loan Interest Rates

Top 10 Lowest Car Loan Interest Rates in India, as low as 6.50%
Top 10 Lowest Car Loan Interest Rates in India, as low as 6.50%

Car loan interest rates determine your total cost of borrowing, therefore you should compare the lowest interest car loans as a first step in choosing an auto loan lender.

Below, you can find the top 10 banks with the lowest car loan rates, as well as their processing fees, which are a one-time payment calculated on the total car loan amount.

Interest Rate RangeProcessing Fee
Kotak Mahindra Prime Limited6.50% - 20.00%Not advertised.
Bank of Baroda7.35% - 10.10%0.50%, minimum Rs. 2500, maximum Rs. 10000
Canara Bank7.35% - 9.90%0.25%, minimum Rs. 1000, maximum Rs. 5000
Union Bank7.40% - 7.50%Rs. 1000
HDFC Bank7.50% - 13.50%1.00%, minimum Rs. 5000, maximum Rs. 10000
ICICI Bank7.50% - 14.00%Rs. 3500 - Rs. 8500
State Bank of India7.75% - 8.45%0.20%, minimum Rs. 500, maximum Rs. 3750
Indian BankFrom 8.05%Not advertised.
Federal BankFrom 8.50%Rs. 1500 - 2500
IndusInd Bank8.70% - 15.00%5.00%

Top Picks for Car Loans

100% On Road FinancingAxis Bank
  • Applies to new car loan for salaried and self-employed borrowers
  • 7 year loan tenure maximum
Benefits for WomenIndian Bank
  • Women receive 0.15% interest rate concession
  • Maximum loan amount of Rs. 2 crore
  • 7 year loan tenure maximum
Car Loan for NRIFederal Bank
  • Free personal accident insurance
  • No prepayment penalties
  • 100% ex-showroom financing
  • No income proof scheme available for self-employed borrowers
No ITR or Income Proof for Self-EmployedIndusInd Bank
  • Applies to new car loan for self-employed borrowers
  • 100% ex-showroom financing
  • 85% ex-showroom financing for commercial vehicles
Large Car Loan for Luxury VehiclesHDFC Bank
  • Loan amounts up to 3.5 crore
  • 100% ex-showroom financing, 85% with no proof of income
  • Top Up car loan available
  • Eligible age for used cars up to 10 years
  • Zero foreclosure fees after 2 years

Best Used Car Loan

Consider this if you seek a used car loan

Interest Rates 9.50% - 10.50%
Processing Fee 0.20%, maximum of Rs. 5000
Margin 80%
Loan Tenure 8 years minus age of vehicle maximum 5 years

State Bank of India (SBI) offers a comprehensive pre-owned car loan package to both salaried and self-employed borrowers. With competitive interest rates starting from 9.50%, an 8 year loan tenure maximum, and financing up to 80% of the car value, SBI makes it possible to minimise the total cost of borrowing without losing out on substantial funding.

Though the SBI car loan interest rate range of 9.50% to 10.50% is not the lowest amongst the banks ValueChampion analysed, its average lending rate of 9.52% is actually cheaper than what other banks charge their borrowers. For instance, HDFC technically has a lower interest rate minimum of 9.40%, but it's average lending rate is 13.33%.

In addition to competitive rates of interest, the SBI secondhand car loan has a very low processing fee of 0.20% with a maximum of Rs. 5000. Paired with lower than average fees like a 1.00% prepayment penalty and 3.00% foreclosure fee, the SBI car loan for used cars can save you many costs down the road.

As a final mention, SBI's car eligibility criteria is flexible compared to the other lenders we analysed. Per SBI terms and conditions, the car loan term offered is 3 to 8 years, depending on the age of your used vehicle. While other lenders only finance used cars up to the age of 5 years, SBI will finance a used car up to 8 years old. It's important to note that SBI will finance up to 80% of your used car valuation, with a minimum of Rs. 3 lakhs and maximum of Rs. 10 lakhs. This is considered a small car loan; if you are seeking a large car loan, you should consider a lender like HDFC or Indian Bank.

Read our full review

Best New Car Loan

Consider this if you seek a new car loan

Interest Rates 7.40% - 7.50%
Processing Fee Rs. 1000
Margin 85%
Loan Tenure 7 years

Union Miles is Union Bank of India's vehicle loan that not only has low interest rates starting from 7.40%, but also high margin financing up to 85% and a long loan tenure of 7 years. Between the auto loan lender's low charges and flexible eligibility criteria, Union Miles is a great option to consider for your new car financing.

Union Bank car loan interest rates fall between 7.40% and 7.50%, with a 0.10% concession for borrowers with a CIBIL score above 700. These rates of interest are well below the average of 9.06%, and place Union Bank in the top 5 lowest rate car loans.

Additionally, Union Bank has a flat processing fee of Rs. 1000, which is comparably lower to other lenders who can charge up to 5.00% of the total loan amount. Further, Union Bank of India advertises no prepayment penalty fees if you choose to pay down your car loan in advance.

Union Bank of India will finance up to only 85% of your new car, however it does not have a minimum or maximum loan amount, which is good for borrowers who may want to buy a vehicle on the more expensive side.

As a final mention, borrowers between the ages of 18 and 75 are eligible for a Union Bank new car loan. Since most banks have a standard age requirement range of 21 and 65, Union Bank of India is open to more borrowers by default.

Read our full review

Best Loan Against Car

Amongst the 25 banks ValueChampion analysed, the Kotak Refinance Car Loan and the ICICI Bank Loan Against Car stand out as the best options for used car loan financing.

Below, we've compared their most important features to help you decide which Loan Against Car best fits your specific needs and qualifications.

Kotak Mahindra Used Car RefinanceICICI Bank Loan Against Car
Interest Rate6.50% - 20.00%Not advertised
Prepayment Penalty5.21% of outstanding balance6.00% outstanding balance
Late Payment Fee3.00% of late EMI2.00% of late EMI
Max Loan Amount90% of car valuation140% of car valuation
Tenure1 - 5 yearsNot advertised

The Kotak Mahindra Used Car Refinance Loan offers interest rates as low as 6.50%, which means borrowers with a good income and credit history can avail some of the lowest interest rates in the market from the lender. Unfortunately, ICICI Bank does not advertise its Loan Against Car interest rates, making it difficult to compare this important factor.

However, ICICI Bank stands out with its large financing margin of 140% of your car's valuation. If you are seeking to borrow maximum funding against your car, then ICICI Bank is the lender to choose, since Kotak only finances up to 90% of your car's valuation.

How to Choose a Car Loan

There are many factors to consider when choosing a car loan, like interest rates, processing fees, and eligibility criteria. To help you with this process, we've created a car loan checklist that details all the important elements of the car loan process.

Car Loan Checklist
Choose Your CarThe first step in getting a car loan is deciding the brand and model of the car that you wish to finance.


Your credit score is a key factor in determining your car loan interest rate, therefore you should dispute any errors on your credit report and improve your CIBIL score before applying, if possible.

Compare Car Loans

Look for the lowest car loan rates, processing fees, and other charges like prepayment and late payment penalties. To find the best car loan for you, you will need to look at factors like loan tenure, margins, and eligibility criteria.

Apply for a Car Loan

Use a car loan EMI calculator to estimate how much you will need to repay each month. Based on your car financing needs and ability to repay your loan, decide on your desired loan amount and apply accordingly.

Submit Required Documents

During your application process, your lender of choice will require documents for proof of address, identity and income in order to verify your ability to pay back your car loan.

Read our full guide


Yes, some banks offer 100% financing of a new car or used vehicle, as long as you meet the lender's eligibility criteria. It's important to note that each bank has different terms and conditions when calculating the maximum car loan amount they are willing to lend. Read our guide to find out which banks offer 100% funding.

Kotak Mahindra Prime Limited interest rates starting at 6.50%. However, you will need to have good car loan eligibility to avail the lowest interest rates. Read our guide to understand how you can find the cheapest car loan.

When you apply for a car loan, the lender of your choice will check your credit history, thus leaving a negative mark on your CIBIL score report. It's important to compare car loans before applying, so that you don't apply to many car loans at the same time and lower your credit score significantly.


Our team of financial analysts reviewed over 75 car loans from more than 25 lenders. We analysed interest rates, processing fees, and other charges to calculate each loan's total cost of borrowing, as well as considered eligibility criteria and special features of each loan scheme. Below, you can find all of the lenders that we meticulously researched and compared.

Lenders Reviewed in ValueChampion's Study
Axis BankBajaj Auto FinanceBajaj FinservBank of Baroda
Bank of IndiaBank of MaharashtraCanara BankCentral Bank of India
Cholamandalam FinanceFederal BankHDFC BankICICI Bank
IDBI BankIDFC First BankIndian BankIndusInd Bank
Jammu & Kashmir BankKotak Mahindra Prime LimitedMagma FincorpMahindra Finance
Punjab National BankSaraswat BankShriram Transport Finance Company LimitedState Bank of India
Sundaram FinanceTata CapitalTata Motors FinanceUnion Bank of India
Natalia Sanchez-Kumar

Natalia Sanchez-Kumar is a Junior Research Analyst at ValueChampion, specialising in loans in India. She is a History graduate of New York University and has worked in the area of social impact, Future of Work and socio-technological research in the US and India. She has co-authored policy proposals alongside the International Labour Organisation in Sri Lanka and the Maldives, as well as hosted a data privacy conference with Facebook in New Delhi.