Buying a new or used car in India has become easier, thanks to competitive car loan options from banks and NBFCs. However, choosing the right EMI, interest rate, and bank can impact your total ownership cost for years.
This car emi loan guide india for 2025 explains everything you need—loan eligibility, latest rates, EMI examples, documents, and expert tips.
What Is Car EMI?
Car EMI (Equated Monthly Instalment) is the fixed monthly amount you pay to the lender until your car loan is fully repaid.
It includes principal + interest, calculated using the reducing balance method in India.
EMI Formula:
EMI = P × R × (1+R)^N ÷ (1+R)^N – 1
Where:
- P = Loan amount
- R = Monthly interest rate
- N = Number of months
How Car Loans Work in India
A car loan in India is a secured loan where the bank keeps the car hypothecated until full repayment.
Interest rates vary based on CIBIL, income, loan type (new/used), and bank policy.
Key Features (2025)
- Loan tenure: 1–7 years
- Typical LTV (Loan-to-Value): Up to 90% of on-road price
- Processing fees: ₹3,000 – ₹10,000 (bank-specific)
- Prepayment rules follow RBI guidelines (no foreclosure penalty for floating rates)
Latest Car Loan Interest Rates in India (2025)
Rates vary by bank and profile. Below is an indicative comparison (subject to change):
Car Loan Comparison Table (2025)
| Bank | Interest Rate (New Car) | 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 |
Which Bank Is Best for Car Loan in India?
The best bank depends on your profile, but SBI and HDFC Bank generally offer competitive rates and higher LTV for salaried buyers.
For faster approval and flexibility, NBFCs like Tata Capital suit self-employed customers.
Car Loan Eligibility in India
Minimum Requirements
- Age: 21–65 years
- CIBIL score: 700+ recommended
- Income:
- Salaried: ₹15,000–₹25,000/month
- Self-employed: ITR of 2–3 years
Factors That Affect Eligibility
- CIBIL history
- Existing EMIs (DTI ratio < 40% preferred)
- Employment stability (minimum 1 year)
- Down payment capacity
Documents Required for Car Loan
Salaried
- PAN + Aadhaar
- Salary slips (last 3 months)
- Bank statements (6 months)
- Address proof
- Passport-size photo
Self-Employed
- GST registration/Business proof
- ITR (2 years min)
- Bank statements (12 months)
Down Payment Requirement in India
Most banks finance 80–90% of on-road price.
Ideal Down Payment
- Minimum: 10%
- Recommended: 20–25% (reduces EMI + interest)
Car EMI Calculation Example
Example: EMI for ₹6 Lakh Swift 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
New vs Used Car Loan EMI Difference
Used car loans have higher interest rates and lower LTV.
Used Car Loan EMI Example (2025)
| Loan Amount | Interest Rate | Tenure | Monthly EMI |
| ₹4,00,000 | 12.5% | 48 months | ₹10,638 approx |
Why Used Car EMIs Are Higher
- Higher risk for lenders
- Depreciation & IDV (Insured Declared Value) is lower
- Shorter tenure options
Processing Fees & Hidden Charges to Check
- Loan processing fee
- Documentation charges
- Hypothecation charges (RTO)
- NOC & RC removal fee
- Late EMI penalty (2–3% per month)
- Part-prepayment fee (fixed-rate loans)
Ownership Cost Beyond EMI (Complete 5-Year View)
Example: ₹8 Lakh Petrol Hatchback
| 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 |
| 4 | ₹9,000 | ₹16,000 | ₹6,000 | ₹31,000 |
| 5 | ₹10,000 | ₹14,000 | ₹7,000 | ₹31,000 |
Tips to Get the Lowest Car Loan Interest Rate in India (2025):
- Maintain CIBIL score above 750
- Compare at least 3 banks + 1 NBFC
- Choose shorter tenure
- Increase down payment
- Avoid taking loans in December rush (higher demand)
- Check salary account relationship offers
Used Car Loan EMI Calculator (How to Use):
A used car loan EMI calculator estimates your EMI based on:
- Loan amount
- Tenure (usually 1–5 years)
- Interest rate (10–18%)
Pros & Cons of Car Loans in India:
Pros:
- Easy ownership without full upfront cost
- Improves credit profile
- Fixed EMIs simplify budgeting
Cons:
- Higher total cost due to interest
- Mandatory comprehensive insurance
- Depreciation reduces resale value
Conclusion:
A car loan can be a smart way to own a vehicle if you choose the right EMI, tenure, and bank. Compare rates, calculate long-term costs, and avoid stretching your budget beyond 35–40% of your monthly income.
FAQ:
Q. What is the minimum CIBIL score for a car loan in India?
A. Most banks prefer a CIBIL score of 700 or above for smooth approval. However, applicants with a 650–699 score may still get approval at a higher interest rate, depending on income, job stability, and overall profile.
Q. Which bank offers the lowest car loan interest rate in India?
A. As of 2025, SBI and HDFC Bank offer some of the lowest car loan interest rates, starting from around 8.7%, subject to the applicant’s credit profile, income, and city.
Q. Can I prepay a car loan without penalty?
A. Yes, floating interest rate car loans follow RBI guidelines, and banks cannot charge foreclosure or prepayment penalties. However, fixed-rate car loans may still have prepayment charges, depending on lender terms.
Q. Is zero down payment car loan available?
A. Yes, zero down payment car loans are available but are limited to strong credit profiles and selected dealers. These loans usually come with higher EMI, higher interest rates, and bundled insurance costs.