Choosing the best bank for car loan India in 2025 can save you ₹25,000–₹1.2 lakh over the loan tenure.
Interest rates, processing fees, CIBIL score, and hidden charges vary widely across banks and NBFCs—making comparison essential for first-time car buyers.
This expert guide breaks down the lowest car loan interest rates in India, eligibility rules, real EMI examples, and bank-wise benefits using the latest 2025 trends.
Why Comparing Car Loans Matters in 2025
Car prices, insurance premiums, and interest rates have increased in the last two years.
A small difference of 0.50% in interest rate can change your EMI significantly.
Most buyers focus only on EMI—but miss:
- Processing fees
- Prepayment rules
- Hypothecation charges
- Relationship-based discounts
- CIBIL-based rate changes
This guide helps you choose the right lender confidently.
Best Bank for Car Loan in India
The best bank for car loan in India in 2025 for most salaried buyers is SBI, due to lower interest rates and high LTV.
For faster approval and flexible documentation, HDFC Bank and Axis Bank work well.
Self-employed buyers often get better approval from NBFCs like Tata Capital.
Latest Car Loan Interest Rates in India
Rates vary by CIBIL, city, profile, and car type (new/used).
Car Loan Comparison Table (New Cars)
| Bank | Interest Rate (2025) | Processing Fee | Min Salary Required |
| SBI | 8.70% – 9.20% | ₹2,000 – ₹5,000 | ₹15,000/month |
| HDFC Bank | 8.90% – 10.50% | Up to 1% | ₹20,000/month |
| ICICI Bank | 9.00% – 10.75% | ₹3,500+ | ₹20,000/month |
| Axis Bank | 9.10% – 10.40% | ₹3,500 – ₹6,000 | ₹18,000/month |
| Kotak Mahindra Bank | 9.25%+ | 0.5% – 1% | ₹20,000/month |
| Tata Capital (NBFC) | 10.25% – 14% | 1–2% | Flexible |
| Mahindra Finance (NBFC) | 11% – 15% | 1–2% | Rural-friendly |
Note: Rates depend on CIBIL score, loan tenure, income stability, and location.
Which Bank Offers the Lowest Car Loan Interest Rate in India?
As of 2025, SBI generally offers the lowest car loan interest rate starting around 8.7%, especially for salaried applicants with CIBIL 750+ and existing salary accounts.
Car Loan EMI Calculation Example
EMI for ₹6 Lakh Loan at 9% for 5 Years
| Loan Amount | Interest Rate | Tenure | Monthly EMI |
| ₹6,00,000 | 9% | 60 months | ₹12,437 approx |
Total Interest Paid: ~₹1,46,220
Total Amount Payable: ~₹7,46,220
If Interest Rate Increases to 10.5%
| Loan Amount | Interest Rate | Tenure | Monthly EMI |
| ₹6,00,000 | 10.5% | 60 months | ₹12,939 approx |
Extra Interest Paid: ~₹30,000+
Tip: Improving your CIBIL score from 680 to 750 can reduce your EMI by ₹400–₹800/month.
New vs Used Car Loan Rate Comparison
| Type | Interest Rate | LTV (Loan-to-Value) | Tenure |
| New Car Loan | 8.7% – 10.5% | Up to 90% | 1–7 years |
| Used Car Loan | 10.5% – 18% | 60–70% | 1–5 years |
Used cars also require RC transfer, IDV-based insurance, and higher processing fees.
Best Bank for Car Loan in India
Best for Lowest Interest Rate
- SBI
- Lower processing fees
- Higher LTV for salaried
Best for Fast Approval
- HDFC Bank
- Strong dealer network
- Instant digital processing
Best for Self-Employed
- Axis Bank / ICICI Bank
- Flexible documentation
Best for Rural & First-Time Buyers
- Mahindra Finance
- Tata Capital
- Suitable for agricultural income profiles
Best for Existing Salary Account Customers
- Choose the bank where salary is credited:
- SBI YONO offers rate concessions
- HDFC & ICICI offer pre-approved loans
Car Loan Eligibility in India
Basic Requirements
- Age: 21–65 years
- CIBIL score: 700+ preferred
- Minimum income:
- Salaried: ₹15,000–₹25,000/month
- Self-employed: ITR proof (2 years)
Factors Affecting Approval
- DTI ratio (keep under 40%)
- Job stability (1 year minimum)
- Existing EMIs
- Down payment capacity
Documents Required
Salaried
- Aadhaar + PAN
- 3 months salary slips
- 6 months bank statement
- Address proof
- Photos
Self-Employed
- GST certificate
- ITR (2 years)
- Business proof
- Current account statements (12 months)
How to Get the Lowest Car Loan Interest Rate
- Maintain CIBIL 750+
- Increase down payment to 20–25%
- Avoid long tenure (higher total interest)
- Compare at least 3 banks + 1 NBFC
- Apply with existing banking relationship
- Avoid applying at multiple banks simultaneously
RBI note: Hard inquiries reduce credit score temporarily.
Processing Fees & Hidden Charges to Check
- Loan processing fee
- Documentation charges
- Hypothecation fee (RTO)
- Part-prepayment charges (fixed-rate loans)
- Foreclosure rules
- Late EMI penalty (2–3% per month)
- NOC issuance after loan closure
Ownership Cost Beyond EMI
| Year | Service Cost | Insurance | Maintenance | Total |
| 1 | ₹4,000 | ₹22,000 | ₹2,000 | ₹28,000 |
| 2 | ₹6,000 | ₹20,000 | ₹3,000 | ₹29,000 |
| 3 | ₹8,000 | ₹18,000 | ₹5,000 | ₹31,000 |
IRDAI reminder: Renew insurance on time to avoid inspection and premium hike.
Pros & Cons of Bank vs NBFC Car Loans
Banks
- Lower interest rates
- Better for high CIBIL
- Lower processing fee
Banks
- Strict eligibility
- Slower approval for self-employed
NBFCs
- Flexible documentation
- Faster processing
- Good for no credit history
NBFCs
- Higher interest rate
- Higher processing charges
Conclusion:
The best bank is not the one with the lowest EMI—but the one that fits your profile, income, and repayment capacity. Compare rates, check hidden charges, and avoid stretching EMI beyond 25% of your monthly salary.
FAQ:
Q. Which is the best bank for a car loan in India in 2025?
A. SBI is considered the best option for most salaried buyers due to its lower interest rates and minimal processing charges. HDFC Bank and Axis Bank are also popular choices, offering faster approvals and strong dealer tie-ups.
Q. Which bank offers the lowest car loan interest rate?
A. As of 2025, SBI offers one of the lowest car loan interest rates, starting at around 8.7%, depending on your CIBIL score, income, and existing relationship with the bank.
Q. What CIBIL score is required for a car loan?
A. A CIBIL score of 700 or above is ideal for easy approval and better interest rates. Scores below 650 may result in higher interest rates or rejection. First-time borrowers can still get approval through NBFCs, usually with a higher down payment.
Q. Can I prepay my car loan without penalty?
A. Yes, floating-rate car loans follow RBI guidelines, and banks cannot charge foreclosure or prepayment penalties. However, fixed-rate car loans may still include prepayment charges depending on lender terms.