A car loan pays the seller now while you repay the lender in equal monthly instalments (EMIs). The car is the security for the loan.

What decides your EMI

  • Loan amount: the price minus your down payment.
  • Interest rate: set by the lender based on your income, credit history and the car’s age.
  • Tenure: longer tenure lowers the EMI but increases the total interest you pay.

EMIs are calculated on a reducing balance, so each payment covers that month’s interest and repays part of the principal. Our EMI calculator shows the split year by year.

Used-car loans are a little different

  • Rates are usually higher than for new cars.
  • Lenders often limit the tenure so the loan ends before the car becomes too old.
  • The loan amount is based on the lender’s valuation, which may be below the asking price.

Documents usually needed

  • PAN card and Aadhaar or other address proof
  • Income proof: salary slips or ITR, and recent bank statements
  • Photographs and a signed application

After the loan

The lender’s name is recorded on the RC (hypothecation). When you finish paying, collect the NOC from the lender and apply to the RTO to remove the hypothecation, otherwise selling the car later becomes harder.

An EMI comfortably below a fifth of your monthly take-home pay leaves room for fuel, insurance and servicing.