Car Loan Interest Rates: Fixed vs Floating Explained
Car loans can be availed at attractive interest rates starting from 7.80% p.a. Depending on the lender, up to 100% of the on-road price of the car may be provided as a loan.
Certain lenders offer car loans with a repayment tenure of up to eight years. The process to apply for a car loan is simple and can be completed both online and offline.
Car Loan Interest Rate Comparison for All Banks
Name of the Bank | Interest Rate (p.a.) | EMI for Rs.1 lakh for 7 years |
8.90% p.a. onwards | Rs.1,601 onwards | |
7.80% p.a. onwards | Rs.1,551 onwards | |
| Contact the bank | |
8.05% p.a. onwards | Rs.1,561 onwards | |
9.40% p.a. onwards (Rack Interest) | Rs.1,629 onwards | |
9.15% p.a. onwards | Rs.1,617 onwards | |
8.55% p.a. onwards | Rs.1,586 onwards | |
8.75% p.a. onwards | Rs.1,596 onwards | |
|
| |
Contact the bank | Contact the bank | |
9.05% p.a. onwards | Rs.1,611 onwards | |
10.50% p.a. onwards | Rs.1,686 onwards | |
|
| |
7.80% p.a. onwards | Rs.1,549 onwards | |
8.80% p.a. onwards | Rs.1,599 onwards | |
|
| |
7.85% p.a. onwards | Rs.1,551 onwards |
Types of Car Loan Interest Rates in 2025
When applying for a car loan, it's important to understand the two main types of interest rates—fixed and floating. Each has its pros and cons depending on your financial goals and the market conditions.
Fixed vs Floating Car Loan Interest Rates
When applying for a car loan, you can choose between fixed and floating interest rates. Each option has its own benefits and risks, so the right choice depends on your financial goals and comfort level.
- Fixed Interest Rate: A fixed rate stays the same throughout the loan tenure. This keeps your EMI constant, making budgeting easier. Fixed rates are usually slightly higher but are ideal if you expect market rates to rise or prefer predictable payments.
- Floating Interest Rate: A floating rate moves up or down with market changes, often linked to the MCLR or base rate. While your EMIs may increase when rates rise, they can also reduce when rates fall, leading to potential long-term savings. Floating rates generally start lower than fixed rates.
Key Differences at a Glance
Fixed Interest Rate | Floating Interest Rate |
Generally higher | Generally lower |
EMI remains constant | EMI varies with market rates |
Lower financial risk | Higher market-linked risk |
Easy to budget | Budgeting can be difficult |
Best for short tenures (3–10 years) | Suitable for long tenures (20–30 years) |
Provides security | Offers savings when rates fall |
When to Choose Fixed or Floating?
- Choose Fixed Rate if you value stability, want predictable EMIs, or expect rates to rise. It provides financial security during uncertain times.
- Choose Floating Rate if you believe interest rates will drop, are comfortable with fluctuations, and have flexibility in your monthly budget. This option can save you money in the long run.
👉 Pro tip: Always check your credit score before applying, as it plays a big role in the rate lenders offer
Factors That Influence Car Loan Interest Rates
Car loan interest rates vary based on several key factors:
- Credit Score: Higher scores often mean lower rates.
- Income & Job Stability: Stable income improves your chances of better rates.
- Loan Amount & Tenure: Shorter tenures usually attract lower rates.
- Type of Car: New car loans have lower rates than used ones.
- Down Payment: A higher upfront payment can reduce your interest rate.
- Bank Relationship: Existing customers may get special offers.
- Market Trends: RBI policies and repo rate changes impact lending rates.
FAQs on Car Loan Interest Rates
- How can I get a lower interest rate on my car loan?
Keep your credit score above 750, opt for a shorter tenure, make a bigger down payment, and show steady income. Always check with your existing bank first, as they may reward your track record.
- Do women get concessional car loan interest rates?
Yes. Many banks and financial institutions offer slightly lower car loan rates for women borrowers.
- Can I bargain with the bank for a better rate?
Yes. If you have a strong credit profile, stable earnings, and a good relationship with the lender, you can request a reduced interest rate. Approval depends on the bank’s policy.
- Are car loan rates fixed or floating?
Both are available. Fixed rates stay the same for the entire tenure, while floating rates move up or down with market changes.
- Does paying a higher down payment reduce the rate?
Yes. A larger down payment means borrowing less, which can help you qualify for a lower interest rate.
- Does the type of car affect the interest rate?
Not directly. However, higher loan amounts for luxury cars may influence the rate a lender offers.
- Which is better: fixed or floating interest rate?
Choose fixed if you prefer stability and want predictable EMIs. Pick floating if you’re comfortable with rate fluctuations.
- Will prepaying my loan reduce the interest burden?
Yes. Prepayment lowers your outstanding balance and future interest. But check for prepayment penalties before deciding.
- Will a 700 credit score affect my loan and interest rate?
Yes. With a 700 score, approval may be tougher, and if approved, the lender may charge a higher interest rate compared to someone with 750+.
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