Best Vehicle Loan Schemes in India – Compare Banks & NBFCs (2025 Guide)

Buying a vehicle, whether a car, bike, or commercial vehicle, is a major investment for most Indians. While many save over years to purchase vehicles outright, vehicle loans have become a convenient way to own a vehicle immediately while paying in easy EMIs. With 2025 shaping the financial landscape, India offers a wide range of vehicle loan schemes through banks and NBFCs, tailored for individuals, self-employed, and business owners.

This guide explains vehicle loan options, eligibility, documentation, interest rates, and tips on how people can use these loans effectively. It also provides a detailed comparison of banks and NBFCs for smarter decisions.

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Why Vehicle Loans Are Popular in India

Vehicle loans provide financial flexibility and several advantages:

1. Immediate Ownership: Buy your car, bike, or commercial vehicle without waiting years to save the full amount.

    

2. Easy EMIs: Spread repayment over 1–7 years depending on loan tenure.

    

3. Flexible Loan Amounts: Loan covers 70–100% of vehicle cost based on lender and vehicle type.

    

4. Preserve Savings: Keep your savings for emergencies or other investments.

    

5. Tax Benefits for Businesses: Interest on commercial vehicle loans can be claimed as business expense.

    

How People Can Use It:
A salaried professional can buy a new car costing ₹10 lakh by paying ₹2 lakh as down payment and financing the remaining ₹8 lakh via an EMI of ₹18,000/month for 5 years.

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Step 1: Types of Vehicle Loans in India

1. Car Loans

• Purpose: Purchase new or used cars for personal or business use.

   

• Loan Amount: 70–90% of on-road price.

   

• Tenure: 1–7 years.

   

• Interest Rate: 8–12% per annum.

   

• Features: Collateral generally not required for cars; insurance can be bundled.

   

2. Two-Wheeler Loans

• Purpose: Buy motorcycles, scooters, or electric bikes.

   

• Loan Amount: 80–100% of vehicle cost.

   

• Tenure: 1–5 years.

   

• Interest Rate: 9–14% per annum.

   

• Features: Quick disbursal, minimal documentation, sometimes 0% processing fee.

   

3. Commercial Vehicle Loans

• Purpose: Trucks, vans, taxis, buses for business.

   

• Loan Amount: 70–90% of vehicle cost.

   

• Tenure: 3–7 years.

   

• Interest Rate: 9–13% per annum.

   

• Features: Tax benefits on interest for business owners; insurance mandatory.

   

4. Electric Vehicle Loans

• Purpose: Buy EVs, scooters, or cars.

   

• Loan Amount: 80–90% of EV price.

   

• Tenure: 3–5 years.

   

• Interest Rate: 8–11% per annum (subsidy under FAME India Scheme can reduce effective cost).

   

• Features: Lower interest rate incentives under government EV policies.

   

How People Can Use It:
Individuals can leverage these loans to buy personal vehicles, while business owners can invest in commercial or electric vehicles to grow operations with manageable EMIs.

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Step 2: Eligibility Criteria for Vehicle Loans

Eligibility differs slightly between banks and NBFCs but typically includes:

1. Age: 21–65 years for salaried individuals; 21–70 years for self-employed.

    

2. Income: Minimum income varies, usually ₹15,000–₹25,000 per month for salaried; ₹3–5 lakh annual turnover for self-employed.

    

3. Employment Type: Salaried, self-employed, or business owner.

    

4. Credit Score: 700+ preferred for better rates and approval.

    

5. Vehicle Type: New or used; age limit for used cars often 5–7 years.

    

How People Can Use It:
Checking eligibility before applying increases approval chances and helps choose the right loan amount and tenure.

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Step 3: Required Documents

For Salaried Individuals:

1. Identity Proof: Aadhaar, PAN card, passport, voter ID.

    

2. Address Proof: Utility bill, Aadhaar, rental agreement.

    

3. Income Proof: Salary slips (3 months), Form 16, bank statements.

    

4. Vehicle Quotation/Invoice: On-road price and model details.

    

For Self-Employed/Business Owners:

1. Identity Proof: Aadhaar, PAN card.

    

2. Address Proof: Utility bill, Aadhaar, rental agreement.

    

3. Income Proof: ITR (2–3 years), business license, bank statements.

    

4. Vehicle Quotation/Invoice: On-road price and model details.

    

How People Can Use It:
Keeping documents ready ensures faster processing and disbursal, especially when purchasing a vehicle from a dealer.

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Step 4: Loan Amount & Down Payment

• Banks/NBFCs usually finance 70–90% of new vehicle cost.

   

• Down Payment: 10–30% of vehicle price, depending on lender and vehicle type.

   

• Used Cars: Loan may cover only 70–80% depending on age and condition.

   

Example:
A new car costing ₹8 lakh → 20% down payment = ₹1.6 lakh, loan amount = ₹6.4 lakh.

How People Can Use It:
Paying a higher down payment can reduce EMI and total interest, improving financial comfort.

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Step 5: Interest Rates & EMI Calculation

Interest rates depend on:

1. Lender Type: Banks generally offer lower rates (8–12%) than NBFCs (9–14%).

    

2. Credit Score: Higher credit score reduces interest.

    

3. Loan Amount & Tenure: Longer tenure may have higher total interest.

    

4. Vehicle Type: EVs or commercial vehicles may have special rates.

    

EMI Calculation Example:
Car loan: ₹6.4 lakh at 9% for 5 years → EMI ~₹13,200/month.

How People Can Use It:
Choose tenure based on cash flow. Shorter tenure = higher EMI but lower interest; longer tenure = smaller EMI but higher total interest.

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Step 6: Compare Banks & NBFCs

How People Can Use It:
Compare interest rate, tenure, and processing fee before choosing a lender. Banks are cheaper but NBFCs may process faster or lend for used/EVs.

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Step 7: Loan Application Process

Step-by-Step:

1. Choose vehicle and calculate loan requirement.

    

2. Select lender based on comparison of interest rates, tenure, and eligibility.

    

3. Submit loan application with documents (online or offline).

    

4. Lender verifies identity, income, credit score, and vehicle details.

    

5. Sanction letter issued specifying loan amount, interest, tenure, and EMI.

    

6. Loan disbursed directly to dealer or account.

    

7. Vehicle registration and insurance completed; loan repayment starts.

    

How People Can Use It:
Following this process ensures smooth and timely approval, helping avoid vehicle purchase delays.

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Step 8: Benefits of Vehicle Loans

1. Immediate Ownership: Drive the vehicle immediately while paying in EMIs.

    

2. Flexible Tenure: Choose repayment tenure according to affordability.

    

3. Wide Options: Available for new, used, commercial, and electric vehicles.

    

4. Government Incentives: EV loans benefit from FAME India subsidies.

    

5. Credit History Improvement: Timely repayment improves credit score for future loans.

    

6. Tax Benefits: Interest for commercial vehicles can be claimed as business expense.

    

How People Can Use It:
Individuals can buy personal vehicles without affecting savings, while businesses can expand vehicle fleets for operations and delivery.

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Step 9: Tips for Getting Best Vehicle Loan

1. Check Credit Score: Aim for 700+ for lower interest.

    

2. Compare Interest Rates: Banks vs NBFCs, new vs used vehicles.

    

3. Negotiate Down Payment: Higher down payment reduces EMI and interest.

    

4. Read Fine Print: Check prepayment, foreclosure, and processing fees.

    

5. Consider Tenure Carefully: Balance between EMI affordability and total interest.

    

6. Use Subsidies: Opt for EV loans under government incentive schemes.

    

How People Can Use It:
Applying these tips reduces loan cost, ensures smooth repayment, and improves long-term financial health.

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Step 10: Avoid Common Mistakes

• Borrowing more than needed.

   

• Ignoring hidden processing fees or insurance bundling costs.

   

• Choosing excessively long tenure, increasing total interest.

   

• Not comparing lenders.

   

• Failing to account for EMI in monthly budget.

   

How People Can Use It:
Avoiding mistakes ensures financial discipline, reduces debt burden, and maximizes the value of vehicle purchase.

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Step 11: Special Vehicle Loan Programs in India (2025)

1. EV Loans under FAME India Scheme: Lower interest, subsidy on vehicle cost.

    

2. Women-Specific Vehicle Loans: Some banks offer priority and discounted rates for female buyers.

    

3. Commercial Vehicle Schemes: Banks and NBFCs provide fleet loans, repayment linked to business revenue.

    

4. Used Vehicle Loans: NBFCs like Bajaj Finance, Tata Capital offer loans for vehicles up to 7–10 years old.

    

How People Can Use It:
Leverage special schemes to reduce overall cost and increase affordability, particularly for electric and commercial vehicles.

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Step 12: Post-Loan Management

• Pay EMIs on time to maintain credit score.

   

• Monitor interest and principal reduction.

   

• Consider prepayment when surplus funds are available to save interest.

   

• Keep proper documentation and insurance updated.

   

• Plan for resale or upgrade without outstanding debt.

   

How People Can Use It:
Proper post-loan management ensures smooth financial health, enabling future loans or upgrades with ease.

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Conclusion

Vehicle loans are a convenient way for Indians to own personal, commercial, or electric vehicles in 2025. By understanding types of loans, eligibility, documentation, interest rates, and lender comparison, borrowers can make informed decisions and enjoy the benefits of owning a vehicle without straining finances.

Key Takeaways:

• Identify the right type of loan: car, two-wheeler, commercial, or electric.

   

• Check eligibility and maintain a healthy credit score.

   

• Compare banks and NBFCs for interest rates, tenure, and processing fees.

   

• Keep all documents ready and prepare a budget for EMIs.

   

• Use government incentives and special schemes to reduce costs.

   

• Manage post-loan repayment, prepayment, and vehicle insurance efficiently.

   

By following these steps, individuals and businesses can access the best vehicle loan schemes, manage EMIs effectively, and achieve convenient vehicle ownership in India.