Two limits decide your car loan
Because the car itself secures the loan, lenders are generally more flexible on car loans than on personal loans. Your amount still depends on two limits, and the lower one applies.
- Value of the car. Lenders fund a percentage of the car's value, known as loan-to-value or LTV. You pay the rest as a down payment.
- Your repayment capacity. Lenders look at how much EMI your income can support after existing obligations. The calculator allows 5 percentage points more FOIR for car loans than for personal loans, up to the overall 80% cap.
How much of the car a lender may fund
| Car | Funding used | Maximum tenure |
|---|---|---|
| New car | 90% of on-road price | 7 years |
| Used, up to 3 years old | 80% | 7 years, or 10 years minus the car's age if shorter |
| Used, 4 to 5 years old | 70% | |
| Used, 6 to 7 years old | 60% | |
| Used, over 7 years old | Most lenders won't finance it | |
These are typical benchmarks used for the estimate. Actual funding depends on the lender, the model and, for used cars, the lender's own valuation. Your estimate may also differ if a lender bases funding on ex-showroom price instead of on-road price, so ask which one it uses.
Worked examples
Each example assumes a CIBIL score of 750 or above and no existing EMIs unless stated, with a new car at the calculator's indicative 8.75% rate.
- ₹30,000 salary, ₹8 lakh car, 7 years. Your repayment capacity supports up to ₹10.34 lakh, but 90% funding limits the loan to ₹7.2 lakh. You pay ₹80,000 as a down payment, and the EMI is about ₹11,493.
- ₹50,000 salary, ₹12 lakh car. The loan is limited to ₹10.8 lakh. The EMI is about ₹17,239 over 7 years, or ₹22,288 over 5 years.
- ₹50,000 salary, ₹6 lakh used car, 4 years old. 70% funding allows ₹4.2 lakh, leaving ₹1.8 lakh to pay yourself. Used cars carry a higher rate in the calculator, here 11.25%.
As these examples show, the car's value is often what limits a borrower with no other loans. Existing EMIs can change this. With a ₹5,000 EMI, repayment capacity in the first example falls from ₹10.34 lakh to about ₹7.2 lakh, leaving no margin.
Eligibility checks for a car loan
- Age: at least 21, with the loan ending by 60 if you are salaried or 65 if you are self-employed.
- Minimum salary: ₹20,000 a month in metro cities, ₹15,000 in Tier 1 cities and ₹12,000 in Tier 2 and 3 towns.
- Self-employed income: at least ₹2.5 lakh a year in ITR profit plus depreciation, with 2 years in business and 2 years of returns preferred.
- CIBIL score: 700 or above is comfortable. From 600 to 649, some NBFCs may lend at a higher rate. Below 600, most lenders decline.
- Minimum loan: the calculator treats ₹1 lakh as the smallest typical car loan.
Your rate matters as much as the amount
A lower score may not change how much you can borrow if the car's value is the limit, but it can change what you pay. On the ₹10.8 lakh example above over 7 years, the EMI is about ₹17,239 at 8.75% and about ₹19,355 at 12.5%. That's over ₹2,100 more each month, or about ₹1.78 lakh across the full loan. It's worth checking your credit report and fixing any errors before you visit a dealer.
How to prepare before you buy
- Know your budget first. Decide your comfortable EMI before you choose a model, rather than stretching to match the car.
- Compare the dealer's finance offer with your bank's. Look at the rate, processing fee and any bundled insurance, not just the EMI.
- Plan for the costs around the loan. A bigger down payment reduces your interest, but keep some money aside for emergencies.
- Get the used car checked. Check the RC and service history, and get the lender's valuation before you pay a deposit.
- Clear card dues if you can. It frees up repayment capacity and may help your credit utilisation.
See the CIBIL score needed for each loan or use the FOIR calculator to test your new EMI.