Owning a car has become more of a necessity than a luxury, especially for Indian families and professionals who need safe and convenient daily travel. But not everyone can pay the full amount of a car upfront. That’s where car loans help. Whether you’re buying a budget hatchback or a mid-size SUV, a car loan spreads your cost into manageable EMIs (Equated Monthly Installments).
But how much do you actually pay in interest on a car loan? And how do different banks compare? This article breaks down exactly how much interest you will pay on a Rs. 7 lakh loan over 5 years and gives you the latest bank-wise car loan interest rates as of April 2025.
Total Interest Payable on Rs. 7 Lakh Car Loan for 5 Years
Let’s say you’re taking a car loan of Rs. 7,00,000 for 5 years (60 months). Interest rates vary from bank to bank but generally fall between 8% and 11% per annum depending on your credit score, income, and whether you’re salaried or self-employed.
Here’s a calculation based on different interest rates:
| Interest Rate | Monthly EMI | Total Interest Paid in 5 Years | Total Amount Repaid |
| 8.00% p.a. | Rs. 14,190 | Rs. 1,51,400 | Rs. 8,51,400 |
| 9.00% p.a. | Rs. 14,560 | Rs. 1,73,600 | Rs. 8,73,600 |
| 10.00% p.a. | Rs. 14,915 | Rs. 1,94,900 | Rs. 8,94,900 |
| 11.00% p.a. | Rs. 15,264 | Rs. 2,15,840 | Rs. 9,15,840 |
This shows that even a 1% increase in interest can add up to Rs. 20,000 or more over five years. So choosing the right lender matters a lot.
Interest Rate of All Major Banks in India (April 2025)
Here’s a snapshot of car loan interest rates offered by leading Indian banks and NBFCs (Non-Banking Financial Companies) as of the latest updates:
| Bank/NBFC | Interest Rate (per annum) | Loan Tenure | Processing Fee |
| SBI (State Bank of India) | 8.75% – 9.75% | Up to 7 years | Rs. 1,000 – Rs. 5,000 + GST |
| HDFC Bank | 8.80% – 10.50% | Up to 7 years | Up to Rs. 4,999 or 0.5% of loan amt |
| ICICI Bank | 9.00% – 10.75% | Up to 7 years | Rs. 3,000 – Rs. 5,000 approx. |
| Axis Bank | 9.05% – 10.90% | Up to 7 years | Rs. 3,500 or up to 1% of loan amt |
| Bank of Baroda | 8.65% – 9.85% | Up to 7 years | Up to Rs. 5,000 |
| Kotak Mahindra Bank | 9.50% – 11.00% | Up to 7 years | Rs. 2,000 – Rs. 6,000 |
| Punjab National Bank | 8.85% – 10.25% | Up to 7 years | Up to Rs. 1,000 + GST |
| IDFC First Bank | 10.00% – 11.50% | Up to 7 years | Based on credit profile |
| Bajaj Finserv (NBFC) | 10.50% – 13.00% | Up to 6 years | Up to 1% of loan amount |
| Tata Capital (NBFC) | 10.25% – 12.50% | Up to 6 years | 0.5% – 2% of loan amount |
Note: These are indicative rates for salaried individuals with good credit scores. Actual rates may vary depending on loan amount, vehicle type, repayment history, and borrower profile.
Factors That Impact Your Car Loan Interest Rate
When banks or lenders offer you a car loan, the interest rate is not always fixed. It is decided based on a few key factors:
1. Credit Score
If your credit score is 750 or above, you can expect better rates. A low score below 650 may lead to loan rejection or higher interest.
2. Loan Amount & Tenure
Longer tenure means lower EMI but more interest paid. Smaller loans may sometimes attract slightly higher interest rates.
3. Type of Car
New cars usually get lower rates compared to used cars. Electric vehicles (EVs) may qualify for special offers under green auto loans.
4. Income & Employer Type
Salaried individuals working with reputed companies or government employees may get loans at lower rates compared to self-employed individuals.
Fixed vs Floating Car Loan Interest Rates
While most car loans come with fixed interest rates, some banks also offer floating rates linked to external benchmarks like the RBI’s repo rate.
- Fixed Rate: EMI remains the same throughout the tenure. Best for long-term planning.
- Floating Rate: EMI may change as per market conditions. Risky but could be cheaper if rates drop.
In 2025, fixed-rate car loans continue to dominate, especially for loans up to 5 years.
Should You Take a Car Loan for 5 Years?
Taking a car loan for 5 years is common in India. It helps keep EMIs affordable. But remember, longer tenure means you pay more in interest.
If you can afford slightly higher EMIs, a 3 or 4-year loan will save you thousands in interest. But if your monthly budget is tight, a 5-year loan is still a good balance between EMI and total interest.
Example:
- EMI for Rs. 7 lakh at 9% for 3 years = Rs. 22,266
- Total interest paid = Rs. 1.01 lakh
- Compare this to Rs. 1.73 lakh over 5 years — that’s Rs. 72,000 saved.
Final Advice Before You Take a Car Loan
- Compare offers from multiple banks or NBFCs.
- Check your credit score before applying.
- Don’t focus only on EMI — look at total repayment too.
- Negotiate interest if you have a good credit profile.
- Be aware of hidden charges like processing fees, prepayment penalties, and late fees.
Sources: RBI, HDFC Bank, SBI, ICICI Bank, Axis Bank, PNB, Kotak Bank, Tata Capital, Bajaj Finserv, Bank of Baroda
