Car Loan Low Interest: If you are planning to buy a car in the new year, this information can be very useful for you. Currently, several banks are offering car loans at very low interest rates. Some banks are offering car loans with starting interest rates as low as 7.40% per annum, making it easier for common people to buy a car. With the right information and a little comparison, you can choose the cheapest and most beneficial loan for yourself.
Cheap Car Loans from Government Banks
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At the beginning of 2026, government banks are offering car loans at very attractive interest rates. Eligible customers can get loans at interest rates below 8%. The advantage of a low interest rate is that your monthly EMI remains low, and you save significantly on interest over the entire loan period. According to Paisabazaar.com, in January 2026, car loan interest rates depend on the bank, the customer’s credit profile, and their relationship with the bank. Currently, car loan rates in the market range from 7.40% to 14%, so it is essential to compare different banks before taking a loan.
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Which Banks are Offering Loans?
Among government banks, Union Bank of India is offering car loans at the lowest starting interest rate of 7.40% per annum. Punjab National Bank, UCO Bank, Indian Bank, and Bank of Maharashtra have starting rates of around 7.50%. Central Bank of India is also a good option, where the interest rate is between 7.60% and 9.20%. Importantly, this bank is not charging any processing fees until March 31, 2026. Some banks also offer additional discounts to their existing customers. For example, Bank of Maharashtra offers a discount of up to 0.25% on interest rates to its existing home loan customers and customers who have been associated with the bank for at least 6 months.
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What will be the EMI on a ₹10 Lakh Loan?
The car loan interest rate depends on your age, income, CIBIL score, and credit history. If you meet all the criteria, you can get a loan at an interest rate of 7.40%. According to Union Bank’s car loan calculator, if you take a loan of ₹10 lakh for 5 years at an interest rate of 7.40%, your monthly EMI will be approximately ₹19,990. Over the entire 5 years, you will have to pay approximately ₹1.99 lakh in interest. This means you will have to repay a total of approximately ₹11.99 lakh to the bank.
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Private banks’ loans are slightly more expensive
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Private sector banks generally offer car loans at slightly higher interest rates compared to public sector banks. For example, HDFC Bank offers car loans starting at around 8.20%, while ICICI Bank’s rates start at 8.50%. Car loans from IDFC First Bank and Federal Bank are also considered relatively more expensive.