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When considering a car loan in India, it’s essential to understand the interest rates offered by various banks and the factors that influence these rates. Here’s a comprehensive guide to help you navigate through the current car loan interest rates and the types of interest rates available.
CAR LOAN INTEREST RATES
Here are the current car loan interest rates that major banks in India offer:
| SR. NO. | BANK | INTEREST RATE |
| 1 | State Bank of India | 8.75% p.a. onwards |
| 2 | HDFC Bank | 9.40% p.a. onwards |
| 3 | Axis Bank | 9.30% p.a. onwards |
| 4 | ICICI Bank | 9.10% p.a. onwards |
| 5 | Canara Bank | 8.70% p.a. onwards |
| 6 | Federal Bank | 8.85% p.a. onwards |
| 7 | Union Bank | 8.70% p.a. onwards |
( * The interest rates mentioned above are accurate as of July 31, 2024. It is advisable to verify these rates with the respective banks before proceeding with your loan application.)
TYPES OF CAR LOAN INTEREST RATES IN INDIA
Car loan interest rates are typically categorized into two types:
- Fixed Interest Rate:
- A fixed interest rate remains constant throughout the loan’s term.
- It is unaffected by market fluctuations, providing borrowers with predictable and stable monthly payments.
- Variable Interest Rate:
- A variable interest rate, also known as a floating interest rate, changes in response to shifts in financial market trends.
- This type of rate can increase or decrease over the loan period, affecting the amount of the monthly installments.
FACTORS AFFECTING CAR LOAN INTEREST RATES
The interest rates applied to your car loan depend on several factors:
1. Income
- Higher incomes typically lead to better lending rates, as they assure banks of timely loan servicing.
- Salaried employees often receive more favorable rates than self-employed individuals, although self-employed professionals can leverage higher incomes for better rates.
2. Tenure
- Longer loan terms often carry higher interest rates due to the increased risk to the lender.
- Choosing a shorter tenure can result in lower interest rates.
3. Age
- The age of the borrower is crucial during the car loan application process.
- Younger borrowers, typically over the age of 21, are offered loans with lower interest rates compared to older applicants.
4. Relationship with Bank
- Long-term customers of a bank may receive favorable interest rates due to their established credit history with the bank.
- Banks can easily assess the financial situation of their existing customers, leading to preferential rates.
5. Vehicle
- The vehicle itself serves as collateral for the loan.
- New cars from reputable manufacturers generally attract lower interest rates compared to older or used cars, as their value depreciates over time.
6. Co-Application
- Adding a co-applicant with an income can enhance your repayment capacity, potentially leading to lower interest rates.
- The combined income of both applicants increases the overall repayment potential.
7. Employment Type
- Employees of reputable companies may secure better interest rates on car loans.
- Banks often maintain a list of approved employers whose employees are considered lower risk due to job stability and regular income.
8. Downpayment
- Making a larger down payment can lead to lower interest rates.
- Higher down payments reduce the loan amount and enhance repayment potential, making the borrower a lower-risk candidate for the bank.
9. Existing Liabilities and Investments
- Current loans and financial obligations impact your loan eligibility and interest rates.
- Borrowers with minimal existing liabilities are preferred by banks, as they pose a lower risk and have better cash flow management.
CONCLUSION
Understanding the factors that influence car loan interest rates can help you secure the best possible deal. By considering your income, loan tenure, age, relationship with the bank, vehicle type, co-application, employment status, down payment, and existing liabilities, you can make an informed decision and potentially lower your interest rates. Opting for a fixed or variable interest rate, you will ensure a smoother car loan experience by staying well-informed.