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Owning a car has become more affordable in India thanks to easy financing options. But when it comes to choosing a car loan, the most important factor to compare is the interest rate. Even a small difference of 1–2% can save you thousands of rupees over the loan tenure.
If you are planning to buy a car in 2025, here’s a detailed guide to the lowest car loan interest rates in India, top banks and NBFCs offering attractive deals, eligibility criteria, and tips to reduce your EMI burden.
Why Car Loan Interest Rate Matters
The car loan interest rate directly impacts your Equated Monthly Installment (EMI) and the total cost of borrowing.
For example:
- Loan Amount = ₹6,00,000
- Tenure = 5 years
At 8% interest, your EMI will be ₹12,167.
At 10.5% interest, your EMI will be ₹12,898.
👉 Difference = ₹731 per month → ₹43,860 over 5 years!
That’s why comparing lowest car loan interest rates before applying is crucial.
Lowest Car Loan Interest Rates in India [August 2025]
Here’s a comparison of top banks & NBFCs offering competitive car loan rates this year:
| Bank/NBFC | Interest Rate (p.a.) | Loan Tenure | Processing Fee |
|---|---|---|---|
| State Bank of India (SBI) | 8.70% – 9.30% | Up to 7 years | 0.25% of loan amount |
| HDFC Bank | 8.80% – 10.00% | Up to 7 years | ₹3,500 onwards |
| ICICI Bank | 8.90% – 10.25% | Up to 7 years | 0.5% of loan amount |
| Axis Bank | 8.75% – 10.20% | Up to 7 years | ₹3,500 – ₹5,500 |
| Punjab National Bank (PNB) | 8.75% – 9.25% | Up to 7 years | 0.35% of loan amount |
| Kotak Mahindra Bank | 8.85% – 9.75% | Up to 7 years | ₹5,000 approx. |
| Federal Bank | 8.90% – 9.50% | Up to 7 years | 0.50% of loan amount |
| Tata Capital (NBFC) | 9.25% – 11.00% | Up to 7 years | 1% of loan amount |
| HDB Financial Services | 9.50% – 12.00% | Up to 6 years | 1% of loan amount |
(Rates updated as of August 2025. Actual rates may vary depending on applicant profile and bank policies.)
Factors Affecting Car Loan Interest Rate
Lenders determine the interest rate based on several factors:
- Credit Score – Higher score (750+) = lower interest.
- Income Stability – Salaried professionals with steady income get better deals.
- Loan Tenure – Longer tenure may mean slightly higher interest.
- Car Type – New cars attract lower interest rates compared to used cars.
- Relationship with Bank – Existing customers may get preferential rates.
How to Get the Lowest Car Loan Interest Rate
Here are some smart ways to secure the best deal:
- Maintain a High Credit Score – Pay EMIs on time and avoid defaults.
- Compare Multiple Lenders – Use loan aggregator websites to check offers.
- Negotiate with Your Bank – Banks often provide special offers to loyal customers.
- Choose a Shorter Tenure – While EMIs may be higher, interest outgo will be less.
- Consider Car Loan Balance Transfer – If you already have a loan at higher rates, transfer it to a lower-rate bank.
Additional Costs to Consider
While interest rate is important, don’t ignore other hidden charges:
- Processing Fee – 0.25% – 1% of loan amount.
- Prepayment Charges – 2% – 5% if you repay early.
- Documentation Fee – Varies by bank.
- Insurance Tie-Ups – Some banks push bundled insurance policies.
👉 Always calculate the total cost of borrowing, not just the interest rate.
Frequently Asked Questions (FAQs)
Q1. Which bank has the lowest car loan interest rate in India 2025?
SBI and PNB currently offer some of the lowest car loan interest rates starting from 8.70% per annum.
Q2. What is the typical tenure for car loans in India?
Most banks offer tenures between 1 year to 7 years, depending on the loan amount.
Q3. Can I reduce my car loan EMI after taking the loan?
Yes, through balance transfer or refinancing to another lender at a lower rate.
Q4. Do banks offer special car loan interest rates for women?
Yes, many banks like SBI and HDFC offer discounted interest rates for women borrowers.
Q5. Is it better to buy a car on loan or in cash?
If interest rates are low and you want to maintain liquidity, a car loan is beneficial. Otherwise, cash purchase avoids any financial burden.
Final Thoughts
Finding the lowest car loan interest rates in India can save you a significant amount over your loan tenure. In 2025, banks like SBI, PNB, HDFC, and ICICI are offering highly competitive rates for both salaried and self-employed applicants.
Always compare multiple lenders, check your EMI with a car loan calculator, and read the fine print before signing. By planning carefully, you can own your dream car without straining your budget.