Are you an aspiring car buyer in this festive season? Are you planning to finance your purchase? If that is the case, you should be clear that the applicable interest rate on your car loan can make all the difference and ultimately determine your overall borrowing cost.
This calls for a proper understanding of the applicable rates, terms and conditions. Currently, PSU banks are offering car loans to individuals at starting rates of less than 8%, although the actual rate may vary based on the borrower’s profile, credit score, repayment history and the lender’s eligibility criteria.
Furthermore, for a ₹5 lakh car loan with a 5-year tenure, the EMIs across these lending institutions range from ₹9,983 to ₹11,647, as per data compiled by Paisabazaar. Aspiring borrowers should hence compare both the interest rate and the total before opting for any particular loan offer or lending institution.
Keeping these important factors in mind, let us look at the most recent car loan rates offered by nationwide.
Car loan interest rates and EMIs offered by PSU banks
|
Name of Banks/NBFCs |
Interest rate (%) p.a. |
EMI (Rs) Loan amount-5 lakh Tenure-5 years |
Processing fee (% of loan amount) |
|---|---|---|---|
| Bank of Baroda | 7.60 – 11.35 | 10,043 – 10,959 | Up to Rs. 2,000 |
| Bank of India | 7.60-12.55 | 10,043 – 11,262 | Up to 0.25% (Rs. 2,500 – Rs. 10,000) |
| Bank of Maharashtra* | 7.45-11.75 | 10,007 – 11,059 | Up to 0.25% |
| Canara Bank** | 7.45-11.45 | 10,007 – 10,984 | 0.25% ( ₹1,000 – ₹5,000) |
| Central Bank of India | 7.50-9.30 | 10,019 – 10,452 | NIL (Till 31.12.2026) |
| Indian Bank | 7.55-9.65 | 10,031 – 10,513 | Rs. 1,200 |
| Indian Overseas Bank | 7.55-12.00 | 10,031 – 11,122 | NIL |
| Punjab and Sind Bank*** | 7.55-14.05 | 10,031 – 11,647 | 0.25% (Rs. 1,000 – Rs. 15,000) |
| Punjab National Bank | 7.60-10.70 | 10,043 – 10,797 | Up to 0.25% (Rs. 1,000 – Rs. 1,500) |
| State Bank of India | 8.70 – 9.85 | 10,307 – 10,587 | Rs. 500 – Rs. 2,000 |
| UCO Bank | 7.35-10.00 | 9,983 – 10,624 | 0.5% (Max. ₹5,000) |
| Union Bank of India | 7.50-10.00 | 10,019 – 10,684 | Up to ₹1,000 |
*Bank of Maharashtra: 0.25% concession for eligible existing customers.
**Canara Bank: 50% processing-fee waiver till 30 September 2026.
***Punjab & Sind Bank: Up to 50% processing-fee concession under PSB Apna Vahan Sugam.
Rates and charges as of 16 September 2026. Source: Paisabazaar.com
5 important factors to check before locking in a car loan
1. Check the actual interest rate offered: The headline rate is generally the starting rate; it can change depending on the individual profile. Factors such as , income history, recent defaults or missed payments (if any), and the relationship with the lending institution all matter before an individual is considered for a car loan.
2. Compare total repayment, not just EMI: A lower does not necessarily mean a cheaper loan. This is a myth that needs to be carefully understood and tackled, because a longer tenure can reduce the monthly burden but increase the total interest paid over the loan period.
3. Factor in processing fees: (if any) can reduce the benefit of a marginally lower interest rate. Check the applicable fee and whether any waiver or concession has conditions attached before signing the car loan agreement.
4. Keep the EMI affordable: The car EMI should leave enough room in the monthly budget for fuel, insurance, maintenance and other regular expenses. Balance is key here.
5. Check prepayment terms: If you expect to make part-prepayments or close the loan early, check the applicable charges, any possible fines, and conditions beforehand. This can be important when comparing otherwise similar loan offers.
Compare the complete cost before borrowing
In summary, a car loan is nothing more than a long-term financial commitment. Even in cases when the monthly EMIs appear manageable. Borrowers should therefore compare the interest rate, processing fee, tenure, total interest payable, and rather than selecting a loan solely on the basis of the lucrative-looking advertised starting rate.
The final borrowing decision should also account for the borrower’s monthly cash flow requirements, other and long-term economic commitments. In case of doubt, it is prudent to seek professional advice from a certified financial advisor in order to plan your car loan in an amicable manner so that reap the benefits later on when you repay the EMIs.