📖 Understanding Car Loans in India

A car loan is a secured loan where the vehicle itself acts as collateral. Banks and NBFCs offer car loans for both new and used cars with interest rates ranging from 7.5% to 14% depending on your credit score, income, and the lender.

For new cars, banks typically finance 80-90% of the ex-showroom price. For used cars, financing is usually 60-70% of the valuation. The down payment reduces your loan amount and consequently your EMI burden.

Car loan tenures typically range from 1 to 7 years. While longer tenure means lower EMI, you end up paying more total interest. A 5-year tenure is most common. Some banks offer balloon payment schemes or step-up EMI options.

Before applying for a car loan, compare interest rates from multiple banks, check processing fees (usually 0.5-2% of loan amount), and understand prepayment charges. A good CIBIL score (750+) helps you get the best rates. Also factor in insurance, registration, and maintenance costs.