What Is a Car Loan?
A Car Loan, also known as an auto loan, is a secured loan offered by banks and financial institutions to help individuals purchase new or used vehicles. In 2026, car loans are widely available through digital platforms with faster approvals and flexible repayment options.
The vehicle purchased using the loan is hypothecated to the lender until the loan is fully repaid. Due to this security, car loans generally have lower interest rates than unsecured loans.
Key Features of Car Loans in 2026
- Financing available for new and used cars
- Lower interest rates compared to personal loans
- Loan tenure up to 7 years
- High loan-to-value ratio
- Quick approval and fast disbursal
- Special offers on electric vehicles
Car Loan Interest Rates in 2026
Car loan interest rates depend on vehicle type, borrower profile, credit score, and lender policy.
| Lender Type |
Interest Rate Range (p.a.) |
Loan-to-Value |
Maximum Tenure |
| Public Sector Banks |
8.50% – 10.00% |
Up to 85% |
7 years |
| Private Banks |
8.75% – 11.50% |
Up to 90% |
7 years |
| NBFCs |
9.50% – 14.00% |
Up to 90% |
5 – 7 years |
Car Loan Eligibility Criteria
- Age between 21 and 65 years
- Minimum stable income source
- Credit score of 700 or above
- Indian resident or eligible NRI
- Vehicle must meet lender norms
Documents Required for Car Loan
- Identity and address proof
- Income proof (salary slips or ITR)
- Bank statements (last 6 months)
- Vehicle quotation or invoice
- Passport-size photographs
Car Loan EMI Example
If you take a car loan of ₹8,00,000 for 5 years at an interest rate of 9.5%:
- Monthly EMI: ₹16,800 (approx.)
- Total interest payable: ₹2,08,000 (approx.)
- Total repayment amount: ₹10,08,000 (approx.)
Advantages and Disadvantages of Car Loans
Advantages
- Affordable EMIs
- Immediate vehicle ownership
- Lower interest than unsecured loans
Disadvantages
- Vehicle depreciates over time
- Asset is hypothecated to lender
- Risk of repossession in case of default
How to Choose the Best Car Loan in 2026
- Compare interest rates and total cost
- Check loan-to-value ratio
- Evaluate processing fees
- Select optimal tenure to manage EMIs
- Check prepayment and foreclosure terms
Frequently Asked Questions (FAQs)
Can I get a car loan for a used vehicle?
Yes, many lenders offer car loans for used vehicles, subject to vehicle age and condition.
Is down payment mandatory for a car loan?
Most lenders require a down payment, though the amount varies by lender and borrower profile.
Are electric vehicles eligible for car loans?
Yes, electric vehicles often qualify for special interest rates and benefits.
Can I prepay my car loan?
Yes, most lenders allow partial or full prepayment after a lock-in period.
Does credit score affect car loan approval?
Yes, a higher credit score improves approval chances and interest rates.
Author: All Finance Store Research Team
Expertise: Vehicle Loans & Consumer Finance
Last Updated: January 2026
Disclaimer: This content is for informational purposes only. Car loan terms, interest rates, and eligibility criteria vary by lender and borrower profile. Always verify details from official lender sources before applying.