As car prices continue to rise and demand remains steady, buyers increasingly rely on competitive car loan offerings to make their dream purchases affordable. A fresh comparison compiled by Paisabazaar.com, reviewed on April 14, 2025, provides a transparent look into the current cheapest car loan interest rates offered by leading public and private sector banks in India.
Cheapest Car Loans (as of April 2025)
According to the data, Indian Overseas Bank offers the lowest starting interest rate at 8.40% per annum. This is followed closely by Union Bank of India, Canara Bank, UCO Bank, and Bank of Maharashtra, each offering car loans starting at 8.45% per annum.
Here’s a quick snapshot of key offers:
| Bank | Interest Rate (p.a.) | EMI for ₹5 lakh (5 years) | Processing Fee |
|---|---|---|---|
| Indian Overseas Bank | 8.40% – 12.00% | ₹10,234 – ₹11,122 | 0.5% (₹500 – ₹5,000) |
| Union Bank of India | 8.45% – 10.20% | ₹10,246 – ₹10,673 | Up to ₹1,000 |
| Canara Bank | 8.45% – 12.45% | ₹10,246 – ₹11,236 | 0.25% (₹1,000 – ₹5,000)* |
| UCO Bank | 8.45% – 11.00% | ₹10,246 – ₹10,871 | NIL |
| Bank of Maharashtra | 8.45% – 12.75% | ₹10,246 – ₹11,313 | 0.25% (max ₹15,000) |
*Canara Bank is offering a 50% waiver on processing fees under its Retail Loan Festival till June 30, 2025.
Noteworthy Offers
- UCO Bank stands out with zero processing fees, making it especially attractive for cost-conscious buyers.
- Bank of India offers up to 50% concession in processing fees for electric vehicle (EV) loans—an encouraging move for sustainability-focused borrowers.
- Indian Overseas Bank offers a 0.50% interest rate concession for borrowers with credit scores above 800.
Premium Bank Offers
Among private sector lenders:
- ICICI Bank has a starting interest rate of 9.10%, with processing fees up to 2%.
- HDFC Bank starts at 9.20%, charging up to 1% of the loan amount (₹3,500 to ₹9,000).
- IDFC First Bank and Federal Bank offer rates starting near 10%, but fees can go as high as ₹10,000 depending on borrower profile.
On the higher end, City Union Bank has one of the steepest car loan interest brackets—starting from 14.45% per annum, with processing fees of 1.25%.
What Should Borrowers Consider?
- Effective EMI: While interest rates are important, compare the EMI using a loan calculator based on your desired amount and tenure.
- Processing Fees: Hidden charges can increase your effective cost—banks like UCO, Union Bank, and Canara Bank provide competitive terms.
- Credit Score Benefits: A good credit score (750+) can significantly reduce interest rates or processing charges.
Compare Smartly
If you’re planning to finance your new car purchase in 2025, public sector banks like Indian Overseas Bank, Union Bank, and Canara Bank provide some of the most affordable financing options currently available. Always compare offers and read the fine print before signing.
