Navigate the Road to Vehicle Ownership with A Car Loan

In today’s urban landscape, a car is no longer a luxury or a mere status symbol, but an absolute necessity for comfortable travel. Owning a car is a milestone that offers convenience, mobility, and a sense of accomplishment. For many, however, purchasing a car outright might not be financially feasible. This is where car loans come into play. 

Car loans are credit instruments that allow you to buy your dream carriage on wheels today and pay off the amount in instalments over time. Be it a humble Maruti Suzuki or a fancy Mercedes, a car loan can get you the four-wheeler you have always wanted.

Essential Components of Car Loans

Before you apply for a car loan, it is important to know about all of the aspects of a car loan. Following are all the key elements to understand before getting a car loan:

Loan Amount

The loan amount is the total sum of money you borrow to purchase the car. It includes the cost of the car, taxes, registration fees, and any additional charges.

Interest Rate

The interest rate is the percentage of the loan amount that you will pay as interest over the loan term. Interest rates can be fixed (remains the same throughout the loan term) or variable (fluctuates based on market conditions). The interest rate on car loans in India is typically between 7% and 10%.

Loan Term

The loan term is the duration over which you’ll repay the loan. The car loan repayment period in India is usually between 36 and 84 months, although longer and shorter terms are also possible.

Equated Monthly Instalments (EMIs)

EMI is the monthly payment you’ll need to pay each month to repay the loan. It includes both the principal (loan amount) and the interest.

Down Payment

The down payment is the initial amount you pay upfront toward the car’s purchase price. It reduces the loan amount and affects the overall loan cost.

Total Loan Cost

The total loan cost is the sum of the principal amount and the interest paid over the loan term. A longer loan term might result in a lower monthly payment but a higher total loan cost due to accruing interest.

Car Loans in India

Choosing a car loan provider can be tricky. It is important to compare all available options before making the decision. To simplify your car loan research process, here is a list of some of the best car loan providers in India and their respective loan terms:

Loan Scheme Interest Rate (p.a.) Processing Fee Repayment Tenure
0.25% of Loan Amount + GST
Up to 7 years
0.5% of Loan Amount
Up to 7 years
₹999 to ₹8,500 + applicable GST
Up to 7 years
₹3500 - ₹12000
Up to 7 years
Up to 2.95% of the loan amount + GST
Up to 8 years

A Step-By-Step Guide to Getting A Car Loan

When it comes to buying a new car, it can be an exciting endeavour and most people approach it improperly. They begin by spotting a car they want and then look for a loan to get it. However, this can be harmful in the long run if the car is too expensive or the loan terms are not favorable. Here are the proper steps to applying for a car loan:

  1. Set the Budget: Setting a clear budget is essential. Determine the total amount you’re willing to spend on the car, including down payment, taxes, registration, and insurance. Factor in ongoing ownership costs such as fuel, maintenance, and insurance premiums to ensure you’re prepared for all expenses.
  2. Research Loan Options: Research various lenders, including banks, credit unions, and online lenders. Compare their interest rates, loan terms, and eligibility criteria. Different lenders offer different types of loans, such as fixed-rate or variable-rate loans, so choose the one that aligns with your financial goals.
  1. Pre-Qualification and Pre-Approval: Pre-qualification gives you an estimate of the loan amount you may be eligible for based on your financial information. Pre-approval, on the other hand, involves a thorough assessment by the lender, resulting in a specific loan offer. Pre-approval strengthens your negotiating position and streamlines the car-buying process.
  2. Choose Your Car: Selecting the right car is exciting, but it’s essential to align your choice with your budget and loan amount. Consider factors such as brand, model, fuel efficiency, and features. Opt for a car that meets your needs while remaining within your financial limits.
  3. Make the Down Payment: A down payment reduces the loan amount and demonstrates your commitment to the purchase. The recommended down payment is typically 10% to 20% of the car’s purchase price. A larger down payment can lead to better loan terms and lower monthly payments.
  4. Complete the Loan Application: Once you’ve chosen a car and finalised the purchase price, complete the loan application with the chosen lender. Provide accurate and complete information to expedite the approval process. Be prepared to submit documentation such as proof of income, identification, and possibly proof of insurance.
  5. Sign the Loan Agreement: Review the loan agreement carefully before signing. Understand the interest rate, loan term, monthly payment, and any associated fees. Seek clarification on any terms you don’t understand. Once you’re satisfied, sign the agreement.
  6. Repay the Loan: After obtaining the car loan, make timely and consistent payments to avoid any negative impact on your credit score. Set up automatic payments if possible, and allocate funds in your budget for the monthly instalment.


Getting a car loan is a significant financial commitment, but it’s a pathway to fulfilling your dream of car ownership. By following these steps and making informed decisions, you’ll not only secure the loan you need but also enjoy the driving experience without unnecessary financial strain. Remember, patience, research, and careful budgeting are the keys to successfully navigating the road to car ownership through a car loan.

Amit Arora Finnable


I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
Finnable Logo