Car Loan in India helps you to buy a new car or used car using the finance provided by bank or financial institution. This helps you to gradually pay the EMIs for your car loan, instead of first accumulating the required amount to buy a new car. It is important to note that the car loan interest rate and tenure is important as these factors decide the amount of EMI you have to pay and the total interest as well. You should save the maximum interest as you can and finish the car loan before time in order to save for your other financial goals.
Let us understand Car Loan in India in more details.
What is Car Loan?
Below are some of the features you should know about Car Loan in India:
- Car Loan helps you to finance for the new or the used car you want to buy
- You can get about 80% to 90% of the on road price as car loan, so that you don’t have to wait to accumulate enough amount to buy the car
- When you take car loan, you have to pay EMI (Equated monthly Installment). This is required to repay the car loan amount you have taken
- Car Loan EMI consists of 2 components – Principal Amount and Interest Amount
- The principal amount is low initially as the start of the car loan tenure
- The interest amount on other hand, is high during the initial stage of your car loan
- This means, maximum of interest amount on your car loan is taken from you during the start of the tenure
- Interest amount is high since the interest is calculated on the remaining balance in your loan account. When you start paying the EMI, the principal amount is reduced from the remaining balance, thus decreasing the the interest amount as well in upcoming months
- You need to ensure that the interest rate of car loan must be low, so that you pay less interest for your car loan throughout the tenure
- Also, when you keep the tenure low, the total interest amount you’ll pay will be less compared to the loan with high tenure.
ALSO READ: Car Loan EMI Calculation Method in India
Car Loan EMI Calculator
You can use below Car Loan EMI Calculator to check how much EMI you have to pay every month, based on the loan amount, interest rate and the tenure you select:
Using above Car Loan EMI Calculator, below are the EMI and total interest you need to pay on the Principal amount = Rs. 5 Lakh, interest rate = 10% and mentioned tenure:
| Tenure | Principal Amount | EMI Amount | Total Interest Amount |
|---|---|---|---|
| 1 Year | Rs. 5 Lakh | Rs. 43,958 | Rs. 27,495 |
| 2 Years | Rs. 5 Lakh | Rs. 23,072 | Rs. 53,739 |
| 3 Years | Rs. 5 Lakh | Rs. 16,134 | Rs. 80,809 |
| 4 Years | Rs. 5 Lakh | Rs. 12,681 | Rs. 1,08,702 |
| 5 Years | Rs. 5 Lakh | Rs. 10,624 | Rs. 1,37,411 |
As seen above, the total interest amount increases with the increase in tenure. But with less tenure, even though the total interest amount is less, you have to pay high EMI amount.
So if you can afford the EMI amount, you should definitely opt for low tenure of car loan
Interest Rates on Car Loan in India
Below are the latest Car loan interest rates in India:
| Bank Name | Interest Rates |
|---|---|
| Canara Bank | 7.30% – 9.90% |
| Bank of India | 7.35% – 7.95% |
| ICICI Bank | 8.82% – 12.75% |
| Indian Bank | 8.20% – 8.55% |
| Union Bank Of India | 7.40% – 7.50% |
| Punjab National Bank | 9.40% – 9.90% |
| Central Bank of India | 7.25% – 7.50% |
| IDBI Bank | 8.40% – 9.00% |
| HDFC Bank | 8.80% – 10.00% |
| Corporation Bank | 7.40% – 7.50% |
| State Bank of India | 7.95% – 8.70% |
| UCO Bank | 7.70% – 9.30% |
What will be EMI for 10 lakh car in India?
For 10 lakh car in India, let’s say if you take 8 lakh car loan amount for 4 years on 10% interest rate, the EMI amount will be Rs. 20,290. Based on the interest rate and tenure, the EMI might change according to your monthly income as well, the tenure might be different.
How to Save Car Loan Interest?
As mentioned above, maximum of the interest amount will be taken from you during the start of the car loan tenure. The total interest amount can be saved by making Car loan prepayments:
- Car Loan Prepayment is a way to make prepayments against your car loan account
- When you have accumulated some amount, you can pay that amount against your remaining balance in your car loan, this will reduce the principal amount remaining in your car loan
- This helps in decreasing the interest amount in your loan EMI you pay every month
- Gradually, by making more prepayments, you can save a lot of interest amounts in your car loan
Watch below video to understand Car Loan Prepayments:
Car Loan Prepayment Examples Video
Watch more Videos on YouTube Channel
So as seen above, the car loan prepayments help you to reduce the current principal balance in your car loan, thus helping you to save the total interest amount.
Conclusion
So car loan can be used to buy a new car or existing car. Factors affecting the car loan EMI are the interest rate and the tenure you select. High interest rate meaning you have to pay more interest overall during the tenure.
Also, if you take the car loan for longer tenure, the total interest amount will be more compared to low tenure car loan. So these are some of the factors you should consider while taking car loan.
Some more Reading:
- Car Loan Floating Interest Rate in Excel
- Electric Vehicle Car Loan Calculation
- SIP vs Lumpsum Investment in Mutual Fund Which is Better
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