What is the Current Interest Rate on Car Loan?

Car Loan Interest Rates

A car loan is offered by a bank or an NBFC (Non-Banking Financial Companies) to its customers to purchase a two-wheeler or four-wheeler vehicle. The interest rates on car loans depend on certain factors, such as loan amount, tenure, and credit score. 

Here, we have covered the car loan interest rates offered by all the banks. You can go through these rates to get all the details about car loans.

What is the Current Interest Rate on Car Loan?

The interest rate you get on a car loan depends on a few factors. You will be eligible for a lower interest rate if your credit score is higher. If you have good credit, you can expect a lower interest rate on your car loan.

What are the Documents Required to Apply for a Car Loan?

The majority of banks will usually require these documents to process your application for a car loan:

Application Form: 

This is the form given by the lender that you should fill out with your personal information and details about the car you want to finance.

KYC Document: 

These documents will help the lender know your identity and address. 

• Identity Proof: Driver's license, passport, voter ID card
• Address Proof: Electricity bill, water bill, phone bill, bank statement with your address

Financial Documents:  

These documents will help the lender determine your ability to repay the loan. 

• Bank Statements: For the past 3–6 months, showing your spending habits.
• Income Proof:
• For salaried individuals: the latest salary slips and Form 16 (tax document from your employer).
• For self-employed individuals: income tax returns for the past 2 years, along with business licenses and financial statements.

What are the Types of Car Loan Interest Rates?

There are two types of car loan interest rates, namely fixed and floating. 

Fixed interest rate:

An interest rate that doesn't change during the duration of the loan is known as a fixed interest rate. The fixed interest rate does not get affected by market fluctuations or other factors; it remains the same throughout. 

• The fixed interest rate is always higher, and the risk is limited.
• The EMIs based on this interest will remain constant.
• The fixed interest rate offers security to borrowers, and it is easy to prepare budgets with this rate.
• Fixed interest rates are usually used for short-term loans. 

Floating interest rate:

An interest rate that keeps changing during the duration of the loan is known as a fixed interest rate. That interest rate is affected by market fluctuations and other factors.

• The fixed interest rate is lower, and the risk is higher.
• The amount of EMI will change according to the marginal cost of funds lent and the lending rate.
• It offers savings to borrowers as the interest rate is lower.
• Fixed interest rates are used for long-term loans. 

What is the Process for Applying for a Car Loan?

• Check your CIBIL score:

The first step in the loan verification process is to check your credit score. To be eligible for the application process, a person must have a valid CIBIL score. A good CIBIL score is higher than 750. If the person has a low credit score, the lender can reject the application. 

• Choose a lender:

Then decide on a bank or lender offering car loans. Check their official websites or visit a branch to see what interest rates they offer on loans.  

• Fill out the form:

Once you have chosen your lender, you will need to fill out an application form. This will ask for your details, employment information, and details about the car you want to buy 

• Check the car loan amount:

Your pre-approval offers will indicate the maximum amount you can borrow; however, this does not relate to the cost of the car you can buy. A further 10% of your money is required for taxes and fees.

• Submit Documents:

After all the processes, the lender will need documents to verify your identity, income, and address. You have to submit all the documents required in order to proceed with the loan process.