Festival season car loans: Banks trim rates, some drop processing fees

State-owned banks' offers start at 7.6%, while private lenders mostly price loans near or above 9%

Automakers are reporting record-breaking sales in the festival season, which was preceded by Goods and Services Tax on small cars being reduced to 18 per cent from 28 per cent.

 

As people head to auto showrooms, financing is in focus. Car loans remain the preferred route for most households, and interest rates can make a meaningful difference to affordability. Car loan rates range from 7.60 per cent to 14.25 per cent per annum, according to data from Paisabazaar.com (as of September 24). Rates depend on the bank, loan amount and borrower profile.

 

Public-sector banks' car loan rates 

 

Public-sector banks continue to set the benchmark for competitive car loan deals.

 

• UCO Bank offers the lowest starting rate at 7.60 per cent, translating into EMIs of about Rs 10,043 for a Rs 5 lakh loan over five years. 
• Canara Bank starts at 7.70 per cent and has announced a festive waiver on processing fees until September 30. 
• Punjab & Sind Bank begins at 7.75 per cent, though its maximum rate climbs to 14.25 per cent.

 

Processing charges at PSU banks are usually capped at 0.25 per cent of the loan amount, keeping upfront costs relatively modest.

 

Private banks' car loan rates

 

Private lenders typically quote higher rates and steeper fees.

 

• ICICI Bank’s rates start at 9.10 per cent and HDFC Bank’s at 9.20 per cent. Both banks have processing charges of up to 1-2 per cent of the loan. 
• Federal Bank and IDFC FIRST Bank are in the 10 per cent and above range.

 

For customers with strong credit profiles, state-owned banks may still prove more cost-effective despite longer turnaround times.

  latest car loan rates in September 

NEW CAR LOAN-RATES AND CHARGES
Name of Lender	Interest rate (%) p.a.	EMI (Rs)  Loan amount-5 lakh  Tenure-5 years	Processing fee  (% of loan amount)
Union Bank of India	7.80-9.70	10,090 - 10,550	Up to Rs 1,000
Punjab National Bank	7.85-9.70	10,102 - 10,550	Up to 0.25% (Rs. 1,000 - Rs. 1,500)
Bank of Baroda	8.15-11.60	10,174 - 11,021	Up to Rs. 2,000
Canara Bank	7.70-11.70	10,067 - 11,047	0.25% (Rs 1,000 - Rs. 5,000)  (100% waiver on processing fee under Retail Loan Festival from 01.07.2025 to 30.09.2025)
Bank of India	7.85-12.15	10,102 - 11,160	Up to 0.25% (Rs. 2,500 - Rs. 10,000)
UCO Bank	7.60-10.25	10,043 - 10,685	0.50% (Rs 5,000)
State Bank of India	8.80-9.90	10,331 - 10,599	Rs 750 - Rs 1,500
IDBI Bank	8.30-9.15	10,210 - 10,416	Rs 2,500  (Zero processing fee till 30.09.2025)
Bank of Maharashtra*	7.70-12.00	10,067 - 11,122	Up to 0.25% of the loan amount (max. up to Rs. 15,000)

Indian Overseas Bank 7.80-12.00 10,090 - 11,122 0.50% (Rs 500 - Rs 5,000) ICICI Bank 9.10 onwards 10,403 onwards Up to 2% HDFC Bank 9.20 onwards 10,428 onwards Up to 1% (Rs. 3,500 - Rs. 9,000) Karnataka Bank 8.95-11.64 10,367 - 11,031 Up to 0.60% (Rs. 2,500 - Rs. 11,000) Federal Bank 10.00 onwards 10,624 onwards Rs. 2,000 - Rs. 4,500 Punjab and Sind Bank** 7.75-14.25 10,078 - 11,699 0.25% (Rs. 1,000 - Rs. 15,000) Indian Bank 7.75-9.85 10,078 - 10,587 Rs. 1,000 IDFC FIRST Bank 9.99 onwards 10,621 onwards Up to Rs. 10,000 Central Bank of India 7.85-9.45 10,102 - 10,489 0.50% of loan amount (Rs. 2,000 - Rs. 20,000) *0.25% interest rate concession for existing home loan borrowers and other existing customers having atleast 6 months of relationship with the bank.  **Concession of up to 50% on processing fee for PSB Apna Vahan Sugam. Rates and charges as of 24th September 2025. Source: Paisabazaar.com

 

Key factors for borrowers

Before choosing a car loan, financial planners advise weighing both interest and fees.

 

Festival offers: Canara Bank and IDBI Bank have waived processing charges until end of September.

 

Customer benefits: Existing account holders often get additional concessions, such as at Bank of Maharashtra.

 

Total cost of borrowing: Even a 0.5 per cent difference in rates can save thousands of rupees across the loan tenure.