How Car Loans Work
Car loans are secured loans where the car itself is the collateral. Banks and NBFCs typically finance 70–90% of the car's on-road price, with tenures ranging from 1 to 7 years.
Interest rates on car loans are usually higher than home loans but lower than personal loans, typically 8.5–11% depending on your credit score and the lender.
Calculating Your Car Loan EMI
The EMI depends on three things: the loan amount, the interest rate, and the tenure. A ₹8,00,000 loan at 9.5% for 5 years works out to an EMI of about ₹16,800.
Extending the tenure to 7 years drops the EMI to about ₹12,900 but increases total interest from roughly ₹2,08,000 to ₹2,83,000 — an extra ₹75,000 for a lower monthly payment.
Down Payment Matters
A larger down payment reduces the loan amount and therefore the interest. Putting down 30% instead of 10% on an ₹8,00,000 car cuts the loan from ₹7,20,000 to ₹5,60,000 — saving over ₹40,000 in interest over 5 years.
Also factor in on-road costs: registration, insurance, and accessories can add 10–15% to the showroom price. Budget for the total, not just the ex-showroom price.
Before You Sign
Compare rates across lenders — a 1% difference on an ₹8,00,000, 5-year loan saves about ₹22,000 in interest. Check for processing fees, prepayment charges, and whether the rate is fixed or floating.
Use our Car Loan EMI calculator to compare loan amounts, rates, and tenures before visiting the dealership, so you negotiate from a position of knowledge.