Car Loan

Any finance availed for the purchase of buying a brand new or a used car is defined as Car Loan. Car loan, also known as Vehicle Loan or Car Finance is one the most complex loan product in India because the car dealers tend to mix together various cash discounts offered by the manufacturers or car financiers in the interest rate offered to the buyer. Due to such things, the chances are that the borrower may not get the best deal on car loan.

The interest rate offered by the lenders on carloans in India may actually vary from the one advertised either in the newspaper or any other media. Unlike other loan products, the interest rate for auto loan varies highly depending on various factors like credit score of the borrower, make and the age of the car and quantum of car loan sought by the borrower.

The credit history of a person gives brief information about the borrowers?? past history of repayments on credit cards or any other loan. A past default or delay in payment may point to a probable risk to the lender, thereby increasing the rate of interest offered to borrower on car loan.

Since car loans based on the cars have different interest rates, it is advisable to decide on the model and make of a car. Loans for Used car or second hand car carry a higher rate of interest as compared to new car loans. However there are some PSU banks, which offers same rate of interest for the used car loans as well as the new car loans. . The quantum of any auto loan can also play a vital role in rate of interest one may get from the car financer.

The lenders usually finance 80-100 per cent of the ex-showroom cost (which excludes the octroi or local taxes levied and insurance in different states) as a loan for new car. The car loan has a maximum tenure of 7 years for a new car which one has to pay through Equated Monthly Installment (EMI). The maximum tenure for used car loan is 7 years as reduced by the age of the car.

The borrower should decide on the quantum of loan required before he finalizes on car loan lender. The quantum of loan will depend on the make of the car, the amount of loan lender is willing to finance and the car loan tenure. Once the amount of funding required is finalized for the vehicle loan, borrower should compare the best deals available from various lenders. The borrower should freeze on the lowest EMI offered for the same loan amount and same tenure. Once that is done, you can negotiate with different lenders for the best deal.

The borrower while selecting the person to provide the car finance should also consider the processing fee for processing his car loan application. The borrower should also clearly understand any prepayment penalty on such car loan, which ranges between 3-5% of the outstanding loan amount. Please note that the processing fee is negotiable and one should negotiate it hard as some of the car finance providers even agree to waive this.


You have identified the dream machine, which you had longed for. The ultimate experience on those four wheels will be yours soon, but which way to go for loan to make it yours? To know which bank can give you the best rates as rates vary from bank to bank, use Apnapaisa compare quotes for comparing various rates across various banks, not only rates you can also analyze salient features of any particular loan product along with the lender's profile. So no more running from bank to bank for interest rates.

Now to know which lenders will be able to meet your accurate requirement, please fill in the form alongside stating all your details.

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Lenders offer car loan for purchase of new as well as used car. The car loan is generally given for a maximum tenure of 7 years. Car Loan interest rates can primarily be classified into two categories i.e. fixed rate and floating rate of interest.

The interest rate offered by the lenders on car loans in India may actually vary from the one advertised either in the newspaper or any other media. Unlike other loan products , the interest rate for auto loan varies highly depending on various factors like credit score of the borrower, make and the age of the car and quantum of car loan sought by the borrower.

Since car loan interest rates are based on the models of the car, it is advisable to decide on the model and make of a car in advance so that you are aware of the interest rate on your car??s loan. Loans for used car or second hand car carry a higher rate of interest as compared to new car loans. However some PSU banks offer the same rate of interest for the used car loans as well as the new car loans.


Step 1
Negotiate your car loan independent of your car purchase. You can consider the car loan rates being offered by the car dealer but also obtain car loan interest rates from the network to get the best possible rates.

Step 2
Finalize the loan amount and the loan period before you begin negotiating the rate of car loan interest

Step 3
Negotiate the car price separately with the dealer from any discounts he is willing to give. The discount being offered by the lender should be used for adjusting your down payment rather than being used to provide cheaper car loan. Keeps the car pricing and interest rates on car loan separate. In order to get the best deal on car prices, negotiate for cash discounts and get it quantified rather than car opting for additional accessories in its place. Once this reaches its limits you can negotiate for minor accessories such as floor mats and dickey mats etc.

Step 4
Negotiate your car insurance separately from your car purchase as well as car loan. You can transfer your no claim bonus from your existing old car for the insurance of the new car. For example if you had a 50% no claim bonus on your old car you can shift the no claim bonus to your new car from the same or any other insurance company. If the car dealer offers the car insurance policy at premiums similar to that offered by others it is better to take the policy through him to obviate any administration issues.

Step 5
Ask for loan EMI quotations for each provider separately as well as details of processing fees and pre-payment charges. Foster competition among them for lower EMI first and then lower processing fees. Pre-payment charges are usually not negotiable. Choose the best option among the offers you receive.


If you have sufficient income and the wish to own a swanky car, new or old- you can get a loan. Auto loans can be about 2.5- 3 times the annual salary for salaried professionals or 6 times the annual income for self-employed professionals.


When applying for a Car Loan
Buying your dream car can become a lot easier with a car loan. Here are the top 3 factors to keep in mind before applying for a car loan

1. Get your own credit report
Apply online at and follow the instruction given there to get a copy of your own credit report. Check your credit report thoroughly to spot errors. If need be, use our advisory services on CIBIL Report to get any errors corrected. Remember any errors in your credit report can reduce your chances of getting a good car loan offer.

2. Negotiate smartly to get the best car loan rates
Here are suggestions by Harsh Roongta, CEO, ApnaPaisa on how even a layman can negotiate a good car loan rate.

3. Opt for fixed rates of interest
Car loans are available at completely fixed rates of interest for the entire tenure as well as floating rates of loan. Make sure that the car loan that you are taking is also fixed for the entire tenure of the loan.

4. Be aware about the Processing fees and Pre-payment Charges
Most car loans have processing fees ranging from 0.50% to 1% of the loan amount . Most car loans will also charge you a fee if you wish to pre-pay the loan of between 3-5% of the loan amount repaid. Some lenders will not allow pre-payment for the first 6 months and some lenders do not allow partial pre-payment.

5. You do not have to necessarily buy car insurance from the Car dealer :
If this is your second car and you are selling off the first one and have had a history of no claim bonuses on the last car then you can transfer the no claim bonus to your new car. Use our car insurance section to compare the deals available on new car insurance with no claim bonuses.

Do not sign blank application forms or documents and keep a copy of all documents submitted to the lender for your future reference. Any promise made by the DSA or even an official of the lender has no value unless it is in writing or at least on email.

So if you are basing your decision on any such promise make sure you get it in record in some form.


A Car Loan allows you to buy your dream car at a substantially lower down-payment. But that's not all. The car manufacturer, the car dealer and the car financier (the bank offering the car loan) all offer a host of subsidies that can sweeten the deal. You could get freebies in the form of accessories or even reduced car loan EMI.

A Car Loan EMI (equated monthly installment) is the amount payable each month towards repayment of your car loan. When buying a car, it is useful to look at the deal in totality. You may use our Car Loan EMI Calculator to assess the effective rate of interest charged on your car loan. For loan amount, enter the car value plus the value of the promised freebies less the initial down-payment. Enter the tenure of your loan. And keep modifying the interest rate slider till your actual EMI equals the amount displayed on the EMI box. This would be the effective interest rate on your car loan.


Several documents establishing your identity, proof of income and residence are required for a loan. But, the documents pertaining to the car, new or old are very important. So even if you are eligible for a loan; without proper car documents you can not get a loan.


With comparatively lesser paperwork and minimal verification from the bank, it takes about three to six days to get a car loan -a lot less time than a home loan. Here is a step-by-step break-up of the car loan application process:
• Enquiry with a lender (Interest Rate, EMI, )
• Documents
• Field investigation agency representative visit
• Loan approval.

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