Synopsis: Car loan is a financial agreement that allows you to borrow money to purchase a vehicle, which you repay over time with interest. In India, car loan can be repaid usually between 1 to 7 years. . This article talks about the top 5 banks that offer the lowest interest rate for car loans.
For many Indians, owning a car is not merely about convenience but represents a lifetime aspiration. Irrespective of whether one seeks the liberty to travel on their own without depending on public transport, the comfort of a car for family use, or the pride in owning an expensive car as proof of their achievements, the purchase of a car is of great importance in Indian society. However, thanks to the competition among the banks in India, fulfilling this lifetime ambition has never been easier. Be it employees earning a monthly salary, professionals working for themselves, or NRIs, Indian banks, both from the public and private sectors, are now offering car loans at very low-interest rates, allowing everyone to buy cars at the most convenient time for them.
1. Bank of Baroda (BOB) — 7.60% Onwards
The Baroda Car Loan from Bank of Baroda is considered the most attractive product among others. BOB offers its customers loans that cover up to 90% of the cost of a brand new vehicle, where the total loan amount cannot exceed ₹5 crore. The loan period can be as long as 7 years (84 months).
- Eligibility: Salaried individuals, businessmen, professionals, corporates, and NRIs can avail themselves of the Loan. The borrower should be above the age of 21 years, with a maximum age limit of 70 years by the end of the loan term. Applicants need to maintain a minimum CIBIL score of 701. Interest is charged on a reducing basis, hence a better credit rating automatically means a lower interest.
- Key Features:
- No foreclosure penalties
- Interest reduction of 0.05% for customers choosing Group Credit Life Insurance (GCLI)
- Lower processing charge (₹1,500–₹2,000 + GST, based on the loan amount)
- Possibility of including the cost of installing LPG/CNG kits in the loan
2. Union Bank of India — 7.60% Onwards
The Union Bank of India gives car loans under their Union Miles program. It caters to both salaried people and the self-employed. They provide financing for up to 85% of the cost price of the car on the road, but there is no limit for the loan amount in case of new cars. The longest period for which the loan can be availed is 7 years (84 months) for new cars.
- Eligibility: Individuals who are citizens of India within the age bracket of 18 to 75 years are eligible to apply. There must be a valid driver’s license. Individuals who have a CIBIL score above 700 need not produce any guarantors. Companies and firms are also eligible for this product for use by directors and employees.
- Key Features:
- No ceiling on the amount of the loan for purchasing a new car
- For salaried applicants having their salary credited to a Union Bank account, there is a margin reduction of 5%
- No pre-payment charge
- Fast disbursement process with fewer documents
- Also includes electric vehicles under the ‘Union Green Miles’ scheme
3. Bank of India — 7.60% Onwards
BOI Star Vehicle Loan Scheme of Bank of India can be availed by resident Indians, NRIs, salary earners, professionals, self-employed people, and companies. For new cars that cost below Rs. 10 lakh, the bank provides loans up to 100 percent of the ex-showroom value of the car. The maximum amount of loan for a salaried individual is Rs. 50 lakh, and the maximum tenure is 7 years for new cars.
- Eligibility: Salaried people, pensioners, professionals, companies, and firms can take out this loan scheme. The loan amount is based on the gross monthly income multiple of 24 for the salaried people or twice the gross annual income per ITR for professionals. NRIs can apply along with resident Indians as joint applicants.
- Key Features:
- 100% finance against the showroom price of cars up to ₹10 lakh
- Includes new four-wheelers, used four-wheelers (maximum three years old), as well as reimbursement of self-funded purchases
- Processing fees are waived for senior citizens and pensioners of the bank
- For personal use as well as for business purposes
Also read: Top 5 Banks Offering the Lowest Education Loan Interest Rates in India (2026)
4. IndusInd Bank — 8.00% Onwards
IndusInd Bank stands out among this list of banks since it is the sole private sector bank, which offers car loans at an introductory annual interest rate of 8.00%. IndusInd Bank provides 100% finance on selected models of vehicles against the ex-showroom cost, with interest computed on a monthly reducing balance basis. The general loan repayment period is up to five years (60 months), extendible in some cases up to seven years.
- Eligibility: Salaried professionals (with minimum annual income ₹2.5 lakh and three years of employment experience) and self-employed persons (with minimum annual net profit ₹2 lakh) are eligible. The required credit score is relatively low, starting at 600. The minimum age requirement is 21 years for salaried customers and 23 years for self-employed applicants.
- Key Features:
- Financing up to 100% on brand-new cars
- Insurance and registration charges covered in some instances
- Collection of documents at home post loan approval
- Schemes without requiring proof of income
- Finance offered for many types of vehicles, such as commercial vehicles and tractors
5. Punjab National Bank (PNB) — 8.10% Onwards
PNB provides car loans through its regular plan and special scheme called “PNB Pride Car Loan” for government officials. Financing offered by Punjab National Bank is up to 85% of the on-road cost of new cars (maximum up to 90%, if there exists a tie-up between the dealer and the bank). The maximum loan amount available to individuals is ₹100 lakh, while the repayment period could be of seven years (84 months).
- Eligibility: Individuals, joint, corporate firms, and non-corporate institutions are eligible. The minimum age criterion is 21 years, and maximum is 65 years during loan maturity. Net monthly income should not be less than ₹20,000, while a minimum CIBIL score of about 650 is expected.
- Key Features:
- Interest rate concession offered to women customers and defence/paramilitary personnel
- Prepayment charges are not levied on floating loans paid off through personal sources
- Special “PNB NIRMAAN 2025 Campaign” providing discounts on rates and no processing fee
Summary Comparison Table
Conclusion
The ideal car loan does not exist, the right loan can only be determined by your financial standing. For instance, if financing is the biggest priority, then Bank of India and IndusInd Bank will be the best options since they allow for 100% funding. Similarly, if long tenure is needed for minimizing EMIs, then Bank of Baroda, Union Bank, Bank of India, and PNB are all good choices since they provide 7-year financing. On the other hand, those who have bad credit scores should approach IndusInd Bank because its minimum requirement for the CIBIL score is only 600.
However, one factor stands out above everything else as being the determinant, your credit score. If the credit score is excellent, then you will enjoy favorable terms regardless of the bank. However, before taking a loan from any bank, you should consider several factors, such as the overall cost of the loan and any hidden fees, including processing fees and insurance coverage. Taking the time to align your loan choice with your financial goals will ensure that your dream car doesn’t come at an unexpected cost.
Written by Shrikara
