How to Apply for a Car Loan with the Best Interest Rate in India (2025 Guide)
How to apply car loan with best interest rate Buying a car is a dream for many families, but for most of us, it requires financial support in the form of a car loan. The biggest question is: How do you apply for a car loan with the best interest rate in India in 2025?
Banks, NBFCs (Non-Banking Financial Companies), credit unions, and even car dealers offer car loan schemes. However, interest rates, hidden fees, and eligibility criteria vary widely. The wrong choice can lock you into years of high EMIs, while the right one can save you ₹50,000–₹1,50,000 over the loan tenure.
This guide explains step-by-step how to get the lowest car loan interest rate, compares leading banks, shares real customer experiences, and answers FAQs to help you make a confident decision.
Step-by-Step: How to Apply for a Car Loan with the Best Interest Rate
- Check Your Credit Score (CIBIL/Experian/CRIF)
- Banks in India generally approve car loans for applicants with a 750+ credit score.
- Customers with 800+ often get the lowest advertised rates (SBI: 8.80%, HDFC: 9.10%).
- Decide Loan Type – New Car vs. Used Car
- New car loans have lower interest rates (starting from 8.70% p.a.).
- Used car loans are riskier for banks, so interest rates start from 11–14% p.a..
- Compare Across Banks & NBFCs
- Never accept the dealer’s first offer. Dealers often mark up loan rates by 0.25%–2% to earn commission.
- Compare at least 5 lenders before finalizing.
- Get Pre-Approved Loan
- Approach your own bank (SBI, HDFC, ICICI, Axis, etc.) where you hold a salary/savings account.
- Pre-approved offers are faster, require minimal paperwork, and often come with discounted processing fees.
- Collect Required Documents
- PAN Card, Aadhaar, income proof (salary slips/ITR), address proof, and bank statements.
- Self-employed customers also need GST filings or audited financial statements.
- Negotiate Loan Tenure & EMI
- Longer tenure = lower EMI but higher total interest.
- Optimal tenure is 5 years, balancing EMI affordability with interest savings.
- Submit Application
- Apply online via bank websites or offline at the branch.
- Processing typically takes 24–72 hours if documents are complete.
- Disbursement & Car Booking
- Once approved, the bank transfers the loan amount directly to the dealer.
- You pay the down payment, sign papers, and take delivery of your new car.
Which bank is best for car loan apply
Comparison of Car Loan Interest Rates (2025)
| Bank/NBFC | New Car Loan Interest Rate (p.a.) | Used Car Loan Rate | Processing Fee | Customer Experience |
|---|---|---|---|---|
| SBI Car Loan | 8.80% – 9.40% | 11.50%+ | ₹1,000–₹1,500 | Transparent, but approval is slow |
| HDFC Bank | 9.10% – 10.25% | 12%+ | Up to 1% | Fast approval, higher hidden charges |
| ICICI Bank | 9.20% – 10.50% | 13%+ | 0.5% – 1% | Flexible repayment, strict eligibility |
| Axis Bank | 9.00% – 10.30% | 12.5%+ | 0.5% – 1% | Easy process, digital KYC |
| Punjab National Bank (PNB) | 9.00% – 9.80% | 11.80%+ | Fixed ₹1,000 | Lower rates, slower service |
| Credit Unions / Co-ops | 8.50% – 9.20% | 11%+ | Nil – 0.5% | Best for members, limited availability |
| Dealer Finance | 0% – 12% (promotions) | 13%+ | High hidden fees | Quick, but costly in long run |
Real Customer Experiences
🔹 Ravi from Chennai (SBI Loan)
“I applied through SBI because I already had a salary account. The process took longer (almost 10 days), but the interest rate was lower compared to HDFC. Saved nearly ₹80,000 over 5 years.”
🔹 Meena from Delhi (Dealer Finance)
“The dealer promised me 0% interest, but later I found out the scheme applied only to specific models. I ended up paying higher EMIs with hidden insurance add-ons. Lesson: never trust only dealer loans.”
🔹 Arun from Bangalore (HDFC Loan)
“HDFC gave instant approval, and I drove my car home within 3 days. But the processing fee and insurance add-on made the overall cost higher. Next time, I’ll compare with SBI or PNB first.”
Tips to Get the Lowest Car Loan Rate
✅ Maintain CIBIL Score > 750
✅ Compare at least 5 lenders
✅ Choose new cars over used cars for lower rates
✅ Negotiate dealer add-ons (insurance, accessories) separately
✅ Opt for shorter tenure (≤5 years)
✅ Apply with your existing bank for pre-approved offers
✅ Check for festive offers (Diwali, Navratri, Independence Day)
How to check SBI Car Loan Balance and Details in 2025
FAQs: Car Loan in India 2025
1. What is the lowest car loan interest rate in India in 2025?
SBI and credit unions currently offer the lowest, starting at 8.80% p.a.
2. Can I get a car loan with bad credit (CIBIL < 650)?
Yes, but at higher rates (12–16%). Some NBFCs approve, but with stricter conditions.
3. Is dealer finance worth it?
Only if you get genuine 0% EMI offers. Otherwise, banks/NBFCs are cheaper.
4. Which is better: SBI or HDFC for a car loan?
SBI = Lower rates, slower processing.
HDFC = Faster approval, slightly higher charges.
5. Do I need a guarantor for a car loan?
Usually no, unless your credit profile is weak.
6. What tenure should I choose?
5 years is ideal. 7–8 years leads to higher overall cost.
7. Are there hidden charges in car loans?
Yes – processing fees, insurance tie-ups, documentation fees. Always check before signing.
8. Can I prepay my car loan?
Yes, but some banks (HDFC, ICICI) charge prepayment penalties. SBI allows part-prepayment without penalty.
9. Do banks finance 100% of car value?
Most finance up to 90% of on-road price. Some festive schemes offer 100%.
10. Which bank is best for used car loans?
PNB and ICICI are more flexible for used cars, though rates are higher.
11. Can self-employed people get car loans?
Yes, but they need ITRs, GST filings, or business proof.
12. Is it better to take a loan from NBFCs like Bajaj Finance?
NBFCs offer faster approval but often higher interest rates than public banks.
Conclusion: How to Apply for a Car Loan with the Best Interest Rate
The best car loan in India 2025 depends on your credit score, income stability, and whether you’re buying new or used.
- For lowest interest rates → SBI, PNB, and credit unions.
- For fast approval → HDFC, Axis, and ICICI.
- For convenience → Dealer finance, but only if transparent.
Always compare offers, check hidden fees, and negotiate before signing. The right car loan can save you lakhs and make car ownership stress-free.
