Car loan rates in January 2026 start at 7.4%, EMIs below Rs 10,000

Check EMIs, interest rates and processing fees across top banks

Car loan rates at the start of 2026 remain competitive, with several public sector banks offering interest rates well below 8 per cent for eligible borrowers. For buyers planning to finance a new vehicle, the difference between the lowest and highest rates can translate into a sizeable gap in monthly outgo and total interest paid over the loan tenure.

 

According to data compiled by Paisabazaar.com, car loan interest rates in January 2026 range from as low as 7.40 per cent per annum to as high as 14 per cent, depending on the lender, borrower profile, and relationship with the bank.

 

 

Where rates are lowest?

Among public sector lenders, Union Bank of India is offering one of the lowest starting rates at 7.40 per cent per annum. On a loan of Rs 5 lakh for five years, this works out to an EMI of about Rs 9,995. Punjab National Bank, UCO Bank, Indian Bank, and Bank of Maharashtra also have starting rates close to the 7.50 per cent mark.

 

Central Bank of India is another competitive option, with rates between 7.60 and 9.20 per cent. It is also waiving processing fees until March 31, 2026, which can lower the upfront cost for borrowers.

 

Several banks are offering concessions to existing customers. Bank of Maharashtra, for instance, provides a 0.25 percentage point interest rate concession to existing home loan borrowers and customers with at least six months of relationship with the bank.

 

How private banks compare?

Private sector lenders continue to price car loans slightly higher. HDFC Bank is offering loans from 8.20 per cent onwards, while ICICI Bank’s rates start at 8.50 per cent. IDFC First Bank and Federal Bank are on the higher side, with rates close to 10 per cent or more for most borrowers.

 

For a Rs 5 lakh loan over five years, EMIs at private banks typically start from around Rs 10,186 and can go up to Rs 10,624 or higher, depending on the interest rate.

  Latest car loan rate table 

Name of Banks/NBFCs	Interest rate (%) p.a.	EMI (Rs)  Loan amount-5 lakh  Tenure-5 years	Processing fee  (% of loan amount)
Union Bank of India	7.40-9.45	9,995 - 10,489	Up to Rs 1,000
Punjab National Bank	7.55-9.45	10,031 - 10,489	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	7.45-11.45	10,007 - 10,984	0.25% ( Rs 1,000 - Rs 5,000)
Bank of India	7.60-12.65	10,043 - 11,287	Up to 0.25% (Rs. 2,500 - Rs. 10,000)
UCO Bank	7.55-10.00	10,031 - 10,624	0.5% (Max. Rs 5,000)
State Bank of India	8.90 - 9.85	10,355 - 10,587	Rs 750 - Rs 1,500
IDBI Bank	7.75-8.90	10,078 - 10,355	Rs 2,500
Bank of Maharashtra*	7.45-11.75	10,007 - 11,059	0.25% (Rs 1,000 - Rs 15,000)
Indian Overseas Bank	7.55-12.00	10,031 - 11,122	0.50% (Rs 500 - Rs 5,000)
ICICI Bank	8.50 onwards	10,258 onwards	Up to 2%
HDFC Bank	8.20 onwards	10,186 onwards	Up to 0.5% (Rs. 3,500 - Rs. 8,000)
Karnataka Bank	8.00-11.50	10,138 - 10,996	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**	7.50-14.00	10,019 - 11,634	0.25% (Rs. 1,000 - Rs. 15,000)
Indian Bank	7.50-9.55	10,019 - 10,513	Rs. 1,000
IDFC FIRST Bank	9.99 onwards	10,621 onwards	Up to Rs. 10,000
Central Bank of India	7.60-9.20	10,043 - 10,428	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 2nd Jan 2026
Source: Paisabazaar.com

Processing fees also matter

While interest rates attract most attention, processing fees can add to the cost. These vary widely:

 

·  Public sector banks generally charge between Rs 750 and Rs 5,000

 

·  Some lenders levy fees as a percentage of the loan amount, capped at Rs 10,000–15,000

 

·  Central Bank of India is currently offering zero processing fees

 

Borrowers should factor in both interest rates and fees before finalising a loan.

 

What borrowers should keep in mind?

Car loan rates are usually linked to credit score, income stability, and existing relationship with the bank. Even a 0.5 percentage point difference can raise the EMI by several hundred rupees over five years. Comparing offers across banks and negotiating for concessions can help reduce the overall cost of borrowing.