Car loan rates at 7.60-14%: Know best rates offered for Diwali season

Some lenders have waived processing fees to win customers amid rising demand for new vehicles

With Diwali around the corner, people planning to buy cars are in a sweet spot. Tax cuts and record automobile sales have spurred demand, prompting banks to roll out car loans at competitive interest rates.

Car loan rates in October

 

According to data from Paisabazaar.com, car loan interest rates range from 7.60 per cent to over 14 per cent per annum. For a loan of Rs 5 lakh to be repaid in five years, monthly EMIs vary from Rs 10,043 to Rs 11,699, depending on lender and borrower profiles.

 

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  (No processing fee under festive offer)
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	Up to 0.25% (Rs 1,000 - Rs. 5,000)
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	NIL
IDBI Bank	8.30-9.15	10,210 - 10,416	Up to Rs 2,500
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)  No processing fee under festive offer)
Indian Overseas Bank	7.80-12.00	10,090 - 11,122	0.50% (Rs 500 - Rs 5,000)
ICICI Bank	8.50 onwards	10,258 onwards	Up to 2%
HDFC Bank	9.20 onwards	10,428 onwards	Up to 1% (Rs. 3,500 - Rs. 9,000)
Karnataka Bank	8.97-11.66	10,372 - 11,037	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)  (No processing fees till 31.03.2026)
*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 8th October 2025.
Source: Paisabazaar.com

 

 

Tax cut, record sales

 

The government’s decision to reduce Goods and Services Tax on cars has effectively lowered on-road prices for many models, enhancing affordability. Auto companies such as Maruti Suzuki and Hyundai have reported strong growth in bookings, signalling robust consumer sentiment.

 

This combination of lower taxes and festive demand has encouraged lenders to introduce offers for the festival season. Such offers include:

 

• Union Bank of India and Bank of Maharashtra waive processing fees under their festival schemes. 
• Central Bank of India will not charge processing fees till March 2026. 
• Punjab and Sind Bank provide a 50 per cent concession on processing fees for select schemes.

 

These concessions could significantly reduce the overall cost of borrowing.

How to choose the right loan

 

Experts recommend looking beyond headline interest rates. Borrowers should consider:

 

• Processing fees: Even small concessions during festivals matter over the loan tenure.
• EMI affordability: Ensure monthly outflows are sustainable.
• Prepayment options: Check for any penalties.
• Total cost of the loan: Account for both interest and fees over the full term.