If you’re planning to buy a new or used car in India this year, understanding the car loan interest rate landscape is crucial. With several banks and financial institutions updating their auto loan rates in July 2025, now is the time to explore the best deals. Choosing the right lender can significantly impact your EMI, loan tenure, and overall cost of borrowing.
Below is an in-depth look at the most competitive car loan interest rates currently available in India, along with insights on bank offers, eligibility criteria, and helpful tips to secure the best financing for your vehicle.
Current Car Loan Interest Rates in July 2025
As of July 2025, most Indian banks offer car loans with interest rates ranging from 7.10% to 10.25% per annum, depending on the borrower’s credit profile, income, and loan tenure. Here’s a snapshot of top banks and their latest rates:
| Bank Name | Interest Rate (p.a.) | Processing Fee | Loan Tenure |
|---|---|---|---|
| State Bank of India (SBI) | 7.25% – 8.55% | Up to ₹5,000 | Up to 7 years |
| HDFC Bank | 7.75% – 9.25% | ₹3,999 onwards | Up to 7 years |
| ICICI Bank | 7.90% – 9.60% | ₹3,500 – ₹5,000 | Up to 7 years |
| Axis Bank | 7.50% – 9.25% | ₹3,500 + GST | Up to 7 years |
| Kotak Mahindra Bank | 7.60% – 10.25% | Up to 2% of loan | Up to 5 years |
| Bank of Baroda | 7.10% – 8.95% | Nil to ₹1,500 | Up to 7 years |
Note: Rates are subject to change based on RBI policy and internal bank guidelines.
Factors Affecting Your Car Loan Interest Rate
Several variables influence the car loan interest rate a bank offers you:
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Credit Score: A score above 750 improves your chances of getting a lower rate.
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Income Level: Higher and stable income reassures lenders about repayment capacity.
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Loan Amount & Tenure: Longer tenures may attract higher interest rates.
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Type of Vehicle: New cars typically get lower rates than used ones.
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Relationship with Bank: Existing customers or salary account holders may get better deals.
How EMI Works and Why It Matters
EMI (Equated Monthly Installment) is the amount you pay each month toward your loan. It includes both the principal and interest components. Lower interest rates reduce your EMI burden and total loan cost over time.
Example:
If you borrow ₹10 lakhs at 8% p.a. for 5 years, your EMI will be approximately ₹20,276. At 10%, it jumps to ₹21,247—meaning you’ll pay about ₹58,000 more over the loan term.
Use online EMI calculators to simulate different scenarios before choosing your loan.
Special Bank Offers in July 2025
Several banks and NBFCs are running promotional bank offers this month:
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SBI: 100% on-road financing for select models + zero processing fee.
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HDFC Bank: Instant approval for pre-approved customers + Amazon vouchers.
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Axis Bank: Special festive rate of 7.50% for women applicants.
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ICICI Bank: Discounted rates for EV (electric vehicle) loans.
Always check for seasonal or festival-linked offers that may give you added value or savings.
Car Loan Eligibility Criteria
Most lenders follow a similar set of eligibility conditions for salaried and self-employed individuals:
Salaried Individuals:
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Age: 21–60 years
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Minimum monthly income: ₹20,000–₹25,000
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Work experience: At least 1 year
Self-Employed Individuals:
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Age: 23–65 years
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Minimum annual income: ₹2 lakh
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Business existence: At least 2 years
You’ll need documents like ID proof, address proof, income proof, bank statements, and car quotation/invoice.
Tips to Get the Best Car Loan Interest Rate
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Compare multiple lenders instead of going with just your primary bank.
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Negotiate if you have a strong credit profile.
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Opt for a shorter tenure to lower interest costs.
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Make a higher down payment to reduce the loan amount and interest burden.
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Check for prepayment charges if you plan to close the loan early.
Frequently Asked Questions (FAQs)
Q1: What is the lowest car loan interest rate in India as of July 2025?
A: Bank of Baroda currently offers one of the lowest rates starting at 7.10% per annum, subject to eligibility.
Q2: Can I get 100% financing on a car loan?
A: Yes, some banks like SBI offer 100% on-road price financing, but this often depends on your credit profile and the car model.
Q3: Are interest rates different for used cars?
A: Yes, used car loan rates are typically higher—ranging from 9.5% to 15% p.a., depending on the vehicle age and lender policy.
Q4: Is it better to choose a fixed or floating car loan interest rate?
A: Most car loans in India come with fixed rates. Fixed rates offer stability, while floating rates may offer lower initial costs but can vary with market conditions.
Q5: What if I miss an EMI?
A: Missing an EMI can impact your credit score and may attract penalties. Always inform your bank in advance if you’re facing temporary financial difficulty.
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