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Car & Vehicle Loan

Car Loan: Eligibility, Documents, EMI and How to Apply

A car loan is a secured EMI loan for up to 7 years. New car rates at major banks start at 7.45% to 8.40%, with 85–100% of on-road price funded.

AI

Written by Ananya Iyer

Updated on 17 September 2026·6 min read

On this page9 sections
Credsir Car & Vehicle Loan guide cover with a percent icon

A car loan is a secured loan for buying a car, repaid in monthly EMIs over up to seven years, with the car hypothecated to the lender until you finish paying. At major banks, new car loans start at 7.45% to 8.40% a year for the best credit profiles, as of 17 September 2026. Banks lend 85% to 100% of the on-road price to borrowers aged 21 or more.

Car loan: key facts

Item What banks publish (checked 17 September 2026)
Lowest new car rates Bank of Maharashtra 7.45%; Bank of Baroda and Union Bank 7.60%; PNB 7.65%; SBI 8.40%
Funding SBI up to 100% of on-road price; Bank of Baroda up to 90%; PNB 85% (90% with manufacturer tie-ups)
Longest tenure 7 years (84 months) at SBI, Bank of Baroda and PNB
Age 21 to 70 at SBI; at Bank of Baroda, age at the end of the loan cannot exceed 70
Minimum income SBI ₹3 lakh a year; PNB ₹25,000 a month
Minimum credit score 701 at Bank of Baroda
Security The car is hypothecated to the lender
RBI repo rate 5.25%; next policy meeting 5–7 October 2026

How a new car loan works

The bank pays the dealer directly, and you repay the bank in equal monthly instalments. The car is registered in your name, but the registration certificate records the bank’s hypothecation until the loan is closed.

You pay the part the bank does not fund, called the margin. At Bank of Baroda the margin is 10% of the on-road price. PNB asks for 15%, or 10% where the manufacturer has a tie-up with the bank. SBI funds up to 100% of the on-road price, which includes registration and insurance.

Rates come in two kinds. Public sector banks such as Bank of Baroda, PNB and Union Bank lend on floating rates linked to the repo rate, so your EMI or tenure can change at each reset. SBI and Axis Bank lend at fixed rates. For every bank’s full rate range, see our car loan interest rates page.

Car loan eligibility

Bank Age Income How much you can borrow
SBI 21 to 70 Net ₹3 lakh a year (salaried or self-employed); ₹4 lakh for agriculturists Up to 48 times net monthly income (salaried); 4 times net profit or taxable income (self-employed); 3 times net annual income (agriculturists)
Bank of Baroda At least 21; no more than 70 at the end of the loan All EMIs, including the new one, within 60% to 80% of income depending on income level Up to 90% of on-road price; minimum CIBIL score 701
PNB Loan to be repaid by 70 (salaried with pension) or 65 (others) Net ₹25,000 a month Up to 25 times gross monthly salary, capped at ₹1 crore for individuals

SBI adds a co-applicant’s income to yours, and PNB lets you add the income of a parent, spouse or earning child. At Bank of Baroda, a salaried borrower earning under ₹50,000 a month can spend up to 60% of income on all EMIs, rising to 80% at ₹1.5 lakh a month or more.

Your credit score sets your rate more than anything else. At Union Bank, a salaried borrower with a score of 800 pays 7.60% on a new car, while a score below 650 pays 10.00%. Read credit score needed for a car loan before you apply.

Documents for a car loan

ItemDetails
Identity proofpassport, PAN card, Aadhaar, voter ID or driving licence.
Address proofany of the above that shows your current address.
Salariedlatest salary slips (SBI asks for the latest one, Bank of Baroda for three), Form 16 and bank statements for six months.
Self-employedincome tax returns for two years, audited balance sheet and profit and loss statement.
Photographstwo (SBI) or three (Bank of Baroda) passport-size photos.
Car detailsthe dealer’s proforma invoice or quotation with the on-road price.

How to apply for a new car loan

  1. Check your credit score and fix errors before applying.
  2. Get the on-road price quotation from the dealer.
  3. Ask two or three banks for the rate at your score, loan amount and tenure.
  4. Compare each bank’s Key Fact Statement, which RBI requires for all retail loans. It shows the annual percentage rate, fees and the EMI schedule.
  5. Submit the application with documents, online or at the branch.
  6. Sign the loan agreement once the bank sanctions the loan.
  7. The bank pays the dealer, and the dealer registers the car with the bank’s hypothecation.
  8. Start paying EMIs from the date in your sanction letter.

EMI on a ₹10 lakh car loan

Rate 3 years 5 years 7 years
7.60% ₹31,152 ₹20,086 ₹15,388
8.40% ₹31,521 ₹20,468 ₹15,786
9.00% ₹31,800 ₹20,758 ₹16,089

A longer term cuts the EMI but raises the interest. At 8.40%, ₹10 lakh costs ₹1,34,764 in interest over 3 years, ₹2,28,102 over 5 years and ₹3,26,045 over 7 years. Try your own figures in the EMI calculator.

Fees and closing the loan early

Bank Processing fee Prepayment or foreclosure
SBI (fixed rate) See SBI’s fee schedule No prepayment charges; no foreclosure charges after 2 years
Bank of Baroda ₹1,500 + GST up to ₹10 lakh; ₹2,000 + GST above; ₹500 + GST for government and PSU staff Floating: nil for individuals. Fixed: nil for part payments up to ₹40,000 within 2 years; 2% + GST otherwise
PNB See PNB’s service charges Floating: nil. Fixed: 2% of the amount outstanding
HDFC Bank Up to 0.5%, minimum ₹3,500, maximum ₹8,000 5% of principal outstanding on loans from 1 December 2025

RBI’s rules bar prepayment charges on floating-rate loans taken by individuals for non-business purposes. Fixed-rate loans can carry a charge, so check the sanction letter.

After the last EMI, collect the no-dues certificate and the bank’s letter, then file Form 35 with your RTO to remove the hypothecation from the registration certificate.

Frequently asked questions

What is the car loan interest rate today?

New car rates at major banks start at 7.45% (Bank of Maharashtra) and 7.60% (Bank of Baroda, Union Bank), as checked on 17 September 2026. SBI’s fixed rate runs from 8.40% to 9.35%. See our page on the lowest car loan interest rates for who qualifies.

What is the eligibility for a new car loan?

At SBI you must be 21 to 70 and earn at least ₹3 lakh a year. PNB asks for ₹25,000 a month, and Bank of Baroda needs a CIBIL score of at least 701.

How much car loan can I get on my salary?

SBI lends up to 48 times your net monthly income, and PNB up to 25 times your gross monthly salary. The loan is also capped at the bank’s share of the on-road price.

Can I get a 100% car loan?

SBI funds up to 100% of the on-road price, including registration and insurance. Bank of Baroda funds up to 90%, and PNB 85% to 90%.

What is the maximum tenure for a car loan in India?

Seven years (84 months) at SBI, Bank of Baroda and PNB for a new car. PNB allows five years for a used car.

Can I close my car loan early?

Yes. Floating-rate loans to individuals carry no prepayment charge. Fixed-rate loans may: HDFC Bank charges 5% and PNB 2% of the amount outstanding.

Is a car loan in India secured?

Yes. The car is hypothecated to the bank until you repay, and some banks also ask for a guarantor or collateral depending on income.

Sources

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