Owning a car was once considered a luxury. However, in today’s economically growing world, a car is essential for convenient travel across the ever-expanding cities.
While not everyone may have the cash for a lump-sum car purchase, numerous lenders can assist you in achieving your dream of owning a car through a car loan.
Applying for a car loan is now straightforward, effortless, and paperless. A few clicks allow you to submit the car loan application form online. Almost every bank today offers car loans with attr active interest rates. Based on one’s financial capability, it is now quite simple to take a car loan and pay EMIs without significantly impacting one’s finances.
Top Car Loan Interest Rates 2024
| Bank Name | Car Loan Interest Rate |
| State Bank of India | 7.70% p.a. onwards |
| ICICI Bank | 7.00% p.a. onwards |
| Indian Overseas Bank | 7.25% p.a. onwards |
| Jammu Kashmir Bank | 7.30% p.a. onwards |
| Canara Bank | 7.40% p.a. onwards |
| HDFC Bank | 7.50% p.a. onwards |
| Karur Vysya Bank | 7.55% p.a. onwards |
| South Indian Bank | 7.55% p.a. onwards |
| IDBI Bank | 7.90% p.a. onwards |
| Yes Bank | 7.95% p.a. onwards |
| Karnataka Bank | 8.20% p.a. onwards |
| Federal Bank of India | 8.25% p.a. onwards |
| Union Bank of India | MCLR + 0.35% onwards |
| Central Bank of India | Repo Rate + 4.80% onwards |
| Lakshmi Vilas Bank | RLLR + 0.75% onwards |
Characteristics and Advantages of Car Loans
- Obtain financing for purchasing new and used cars.
- The financing can cover 85%-90% of the on-road price of the car, with some banks offering up to 100% financing based on certain conditions.
- The loan duration can vary from one year to seven years.
- The loan amount can be up to three times the annual income of the applicant.
- Some lenders provide instant financing options for cars.
- You may receive additional discounts and offers if you opt to purchase a car from a dealer or manufacturer that the bank has a partnership with.
- The car bought with the loan will serve as collateral until the loan is fully repaid.
- The repayment method most commonly used for a car loan is equated monthly installments (EMI).
Types of Insurance for Car Loan Applicants
When you apply for a loan to buy a car, it’s important to consider the types of insurance that can protect your investment and guarantee your peace of mind. Here are the main types of insurance you should consider:
Car Insurance:
Coverage:
- Liability Insurance: Covers damage you may cause to other people or property in an accident.
- Collision Insurance: Covers damage to your own car in the event of an accident.
- Comprehensive Insurance: Covers damage to your car from non-collision events such as theft, vandalism, fire and natural disasters.
- Importance:
This insurance is generally mandatory by law and by most car loan lenders.
GAP Insurance (Guaranteed Asset Protection):
Coverage:
Covers the difference between the market value of the car and the outstanding loan balance in the event of a total loss (total loss) of the vehicle.
Importance:
Protects against rapid depreciation in the value of the car, especially in the first few years.
Payment Protection Insurance:
Coverage:
Covers loan payments in the event of unexpected events such as unemployment, disability or death.
Importance:
Ensures that you can continue to repay the loan, even in adverse circumstances.
Credit Life Insurance:
Coverage:
Pays the remaining balance of the loan if the borrower dies.
Significance:
Relieves the financial burden of the debt on the deceased’s family members.
Credit Disability Insurance:
Coverage:
Covers your loan payments if you become disabled and cannot work.
Importance:
Protects against loss of income due to disability, ensuring that the loan continues to be paid.
Extended Warranty Insurance:
Coverage:
Covers repairs and replacement of parts after the original manufacturer’s warranty expires.
Importance:
Protects against unexpected vehicle repair costs, providing additional peace of mind.
How do I choose between loans?
Deciding between a personal loan and a car loan depends on your specific financial needs and circumstances. A personal loan offers flexibility, as the money can be used for any purpose, including buying a car. These loans are usually unsecured, which means you don’t have to use the vehicle as collateral. However, this flexibility comes at a cost: interest rates on personal loans tend to be higher than those on a car loan, especially if you have a less favorable credit history.
On the other hand, a car loan is specifically designed for the purchase of vehicles and usually offers lower interest rates because the car itself serves as collateral. This means that if you fail to repay the loan, the bank can repossess the car to cover the debt. In addition, the terms of a car loan can be more favorable in terms of term and amount financed, making it easier to manage the monthly payments. However, the downside is that the use of the funds is restricted to the purchase of the vehicle, and approval may be subject to a more rigorous analysis of the car itself.
Consider the total cost of owning the car
As mentioned earlier, the overall cost of ownership is a crucial aspect when buying a car. However, many individuals overlook the comprehensive view.
To determine the total cost of owning a car, you need to account for the fees and charges involved, the nature of these fees and charges, the interest rate, the initial down payment, the total amount you will pay to the bank from the beginning of the loan until you fully repay the debt, fuel expenses, car insurance premiums, the taxes you pay, and many other costs.
Each bank may have established different processing fees and documentation costs. Some lenders impose a penalty if you decide to close the loan account well before the end of the loan term. All these elements are significant when selecting the lender.
Look for offers and discounts
Most lenders offer special deals and discounts during Indian festivals like Dasara and Deepavali. There may be other times when lenders or car dealers provide discounts and offers.
Occasionally, there may be 0% finance schemes as well. Keep an eye out for such promotions to save some money.
