Best Used Car Loans in India 2021

If you are seeking to purchase a second hand vehicle, you may need additional financing from a bank or car loan lender. We've chosen the best used car loans for borrowers based on interest rates, loan tenures, and maximum funding, amongst many other factors. Read our expert guide to find the best used car loan for you.

Table of Contents

Used Car Loan Interest Rates

Top 10 Lowest Used Car Loan Interest Rates in India
Kotak Mahindra website does not specify used car loan interest rates. Expect higher rates.
Top 10 Lowest Used Car Loan Interest Rates in India
Kotak Mahindra website does not specify used car loan interest rates. Expect higher rates.

Used car loan interest rates start from 7.35% and are charged as high as 20.00% or more, depending on your loan eligibility. Most lenders offer fixed interest rates, which stay consistent over your loan tenure and therefore allow for better planning of equated monthly instalments. Below, you can find the top 10 lowest interest car loans of the lenders that our financial analysts reviewed.

Car Loan LenderInterest Rate RangeProcessing Fee
Kotak Mahindra Prime Limited6.50% - 20.00%Ask the lender.
Canara Bank7.35% - 9.90%0.25%, minimum Rs. 1000, maximum Rs. 5000
HDFC Bank9.40% - 16.35%1.00%, minimum of Rs. 5000, maximum Rs. 10000
State Bank of India9.50% - 10.50%0.20%, maximum of Rs. 5000
ICICI Bank10.00% - 18.00%2.00%, maximum Rs. 15000
Union Bank10.40% - 10.50%Rs. 1000
Indian BankFrom 11.00%Ask the lender.
Federal BankFrom 13.80%Rs. 1500 - 2500
IndusInd Bank14.00% - 20.00%5.00%
Axis Bank14.55 - 16.55%1.00%, maximum Rs. 6000

Best Used Car Loan for Low Interest Rate

Consider this if you are seeking the lowest car loan interest rates

Interest Rates 7.35% - 9.90%
Processing Fee 0.25%, minimum Rs. 1000, maximum Rs. 5000
Margin 80% - 90%
Loan Tenure 5 years

If you are seeking a low interest car loan, Canara Bank is the first lender you should consider for your car financing needs. With used car loan rates between 7.35% and 9.90%, the Canara Bank car loan has some of the lowest rates in India. Additionally, the lender offers a 0.05% interest rate concession to women.

The lender's extra charges are also comparably lower than other banks and car loan lenders. The Canara Bank processing fee is set at 0.25% of the total loan amount, with a maximum charge of Rs. 5000. Similarly, the bank charges a prepayment penalty of only 2.00% of the outstanding balance, which is good for borrowers who wish to pay down their car loan in advance.

It's important to note that Canara Bank funds up to Rs. 15 lakhs (or 60% of the car's valuation, whichever is lower), which means that the Canara Bank car loan is not tailored to luxury vehicles or borrowers who require more funding assistance. If you are in need of more car loan financing, we recommend you read our reviews of HDFC Bank or State Bank of India.

In terms of car loan eligibility, Canara Bank has relatively standard conditions. The bank allows a 5 year tenure on car loans, as well as a maximum used car age of 5 years. Salaried borrowers should have an annual income of Rs. 2.5 lakhs, while self employed borrowers should have a minimum annual income of Rs. 3 lakhs as per their latest income tax return.

Read our full review

Best Used Car Loan for Long Loan Tenure

Consider this if you are seeking low EMIs over a long repayment period

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

ValueChampion found that State Bank of India (SBI) offers the best used vehicle loan, due to their comprehensive pre-owned car loan packages for agriculturalists, salaried and self employed borrowers. With one of the longest loan tenure maximums in the market, SBI's 8-year loan term allows borrowers to pay low EMIs over a longer period of time.

SBI car loan interest rates are charged between 9.50% and 10.50%, with an average lending rate of 9.52%. While SBI does not have the lowest interest rates in the market, it still fares well against our calculated average of 10.65%.

In addition to competitive rates of interest, the SBI second hand 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.

SBI will finance up to 80% of your used car's 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, we recommend you read our review of HDFC Bank.

SBI's car loan eligibility criteria is flexible compared to the other lenders we analysed. As mentioned, the bank's 8-year car loan tenure is one of its biggest strengths. Most other lenders allow EMI repayment only up to 5 years. However, it's important to note that your final loan term will depend on the age of your used vehicle (with a maximum age of 5 years).

Read our full review

Best Used Car Loan for 100% Financing

Consider this if you are seeking maximum financing for your new vehicle

Interest Rates 9.40% - 16.35%
Processing Fee 1.00%, minimum of Rs. 5000, maximum Rs. 10000
Margin 100% | Up to 85% without income documents
Loan Tenure 12 months to 84 months

The HDFC Bank car loan is amongst the most popular car loans in India for good reason. The bank finances 100% of on-road costs, with a maximum of Rs 2.5 crore. In addition, HDFC Bank gives the option of 85% funding to borrowers who have no income documents.

HDFC used car loan interest rates start from 9.40% and can be charged as high as 16.35%. With an average lending rate of 13.33%, it's clear that HDFC is not the most cost-friendly option. However, HDFC's stand out feature is its ability to finance expensive or luxury vehicles, hence its high rates of interest as large loan amounts come with more risk in repayment.

SImilarly, the bank's fees and extra costs are comparably higher than other banks and car loan lenders. HDFC charges a 1.00% processing fee, with a minimum of Rs. 5,000 and maximum of Rs. 10,000. Further, its prepayment and foreclosure charges are charged between 3.00% to 6.00%, which is higher than the other lenders that our financial analysts reviewed.

Regarding car loan eligibility, HDFC Bank provides great features to borrowers. Competing with State Bank of India, HDFC Bank has a maximum loan tenure of 7 years (without any conditions). Further, HDFC car loans finance pre-owned vehicles up to 10 years of age by loan maturity.

HDFC Bank eligibility criteria for applicants is standard. Salaried borrowers should be between the ages of 21 and 60, while self employed borrowers should be no older than 65 by loan maturity. Additionally, the income requirement for both salaried and self employed borrowers is Rs. 2.5 lakhs per annum, including the income of your spouse or co-applicant. It's important to note that HDFC requires 2 to 3 years of employment stability, as well, depending on your job status.

Read our full review

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


To choose the best bank for a used car loan, you will need to consider its interest rates, processing fee, and eligibility criteria, amongst other factors. You can find the best banks for a used car loan here.

Used car loan interest rates are a significant factor in determining your total cost of borrowing. You can find used car interest rates between 7.35% and 20.00% or more, depending on your eligibility.

Depending on your car financing needs, you can find a small car loan of Rs. 10 lakhs or large car loan up to Rs. 2.5 crore. Each bank or car loan lender provides different minimum and maximum used car loan amounts.

Used car loans are for borrowers who are seeking help in financing the purchase of a second hand car. Based on your car loan eligibility, you can avail significant funding from a bank or lender to cover the costs of the car you wish to purchase. You will have to repay your car loan in EMIs over a period of time, with additional costs like a car loan interest rate factored in.

A car loan EMI calculator allows you to estimate your car loan EMI. Most banks and lenders offer a car loan calculator on their website. By inputting your loan amount, car loan interest rate, and loan tenure, you can calculate how much loan will need to be repaid per month.


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.