Buying a car is one of the biggest financial decisions for many families. While attractive discounts and festive offers can reduce the purchase price, the interest rate on your car loan plays an equally important role in determining the total cost of ownership.
Even a 0.50% difference in the interest rate can save thousands of rupees over the loan tenure. That’s why comparing banks before signing the loan agreement is always a smart move.
Based on the latest available rates, here are five banks offering some of the lowest car loan interest rates in India in 2026. Compare their key features, eligibility, and repayment options below.
Top 5 Banks Offering Low Car Loan Interest Rates
| Bank | Interest Rate (p.a.)* | Maximum Loan Tenure | Maximum Funding |
| Canara Bank | 7.45% onwards | Up to 8 Years | Up to 100% of on-road price |
| Indian Overseas Bank | 7.55% onwards | Up to 7 Years | As per eligibility |
| Union Bank of India | 7.80% onwards | Up to 7 Years | Up to 90%-100% |
| Punjab National Bank | 7.85% onwards (Floating) | Up to 7 Years | Up to 90%-100% |
| Bank of Baroda | 8.15% onwards (Floating) | Up to 7 Years | Up to 90% |
1. Canara Bank Car Loan
Canara Bank currently offers one of the lowest starting car loan interest rates among major public sector banks. The bank finances both salaried and self-employed applicants and provides funding for new as well as select used vehicles.
Highlights
- Interest Rate: 7.45% onwards
- Loan Amount: Up to 100% of the on-road price (eligible cases)
- Tenure: Up to 8 years
- Processing Fee: 0.25%
- No hidden foreclosure charges as per applicable terms.
Best For: You can enjoy the lowest interest rate with a longer repayment tenure.
2. Indian Overseas Bank Car Loan
Indian Overseas Bank is another attractive option for customers seeking affordable vehicle financing. It offers competitive rates with flexible repayment options.
Highlights
- Interest Rate: 7.55% onwards
- Loan Tenure: Up to 7 years
- Available for new passenger vehicles
- Competitive EMIs
- Simple documentation process.
Best For: Salaried employees and existing bank customers.
Also Read: Digital Personal Loan with Low EMIs for 5 Lakh
3. Union Bank of India Car Loan
Union Bank offers affordable financing with flexible repayment schedules and high loan eligibility for eligible borrowers.
Highlights
- Interest Rate: 7.80% onwards
- Loan Amount: Up to 90%–100% of the vehicle value (subject to eligibility)
- Loan Tenure: Up to 7 years
- Online application facility
- Available for both salaried and self-employed applicants.
Best For: Customers seeking competitive rates with flexible financing.
4. Punjab National Bank (PNB)
Punjab National Bank provides car loans for new vehicles at attractive floating interest rates with no processing fee on certain products.
Highlights
- Interest Rate: 7.85% onwards (Floating)
- Loan Tenure: Up to 7 years
- Financing available for new cars
- Nil processing fee on selected schemes
- Quick loan approval for eligible customers.
Best For: Existing PNB customers and borrowers looking for public sector bank financing.
5. Bank of Baroda Car Loan
Bank of Baroda remains one of India’s most preferred public sector lenders for vehicle finance. It offers flexible repayment options and attractive floating interest rates.
Highlights
- Interest Rate: 8.15% onwards (Floating)
- Loan Tenure: Up to 7 years
- Loan available for new vehicles
- Flexible EMI options
- Online and branch application available.
Best For: Borrowers seeking flexible repayment and competitive floating rates.
Factors That Affect Your Car Loan Interest Rate
Banks consider several factors before deciding your interest rate:
- Credit score
- Monthly income
- Employer category
- Existing loan obligations
- Down payment amount
- Vehicle model and age
- Loan tenure
Applicants with strong financial profiles are more likely to receive the lowest advertised rates.
Also Read: Low CIBIL? Get a Credit Card with 2,000 FD
Conclusion
Choosing the right car loan is about more than just finding the lowest advertised interest rate. You should also compare the repayment tenure, processing fees, loan-to-value ratio, prepayment rules, and overall customer service.
Among the leading lenders, Canara Bank, Indian Overseas Bank, Union Bank of India, Punjab National Bank, and Bank of Baroda currently offer some of the most competitive car loan rates in India. Before applying, compare offers carefully, maintain a strong credit score, and select a loan that fits your monthly budget and long-term financial goals.