Best Car Loan Interest Rates in India (2025): Indian Overseas Bank and Union Bank Offering Budget-Friendly Deals
Owning a car is not just a dream—it's a symbol of comfort, convenience, and social status in modern India. But due to rising costs, many people find it challenging to purchase a car outright. That’s where car loans come in as a practical solution, allowing you to own your dream vehicle without draining your savings.
If you're planning to buy a car in 2025 and are looking for the lowest interest rates on car loans, then you must consider Indian Overseas Bank and Union Bank of India, two public sector banks that are offering attractive car loan interest rates, especially for electric vehicle (EV) buyers.
🚘 Why Take a Car Loan?
A car loan provides flexibility to:
-
Buy your dream car even if you're short on funds.
-
Spread out the payment over a convenient tenure.
-
Build or improve your credit score with timely EMIs.
-
Avail tax benefits in some cases (especially for business usage).
🏦 Top Car Loan Offers in 2025: Indian Overseas Bank vs Union Bank
🔹 Indian Overseas Bank (IOB)
Indian Overseas Bank, a trusted government-owned lender, has emerged as one of the most affordable banks for car loans this year.
| Vehicle Type | Interest Rate |
|---|---|
| Electric Vehicles (EVs) | 8.15% |
| Petrol/Diesel Vehicles | 8.35% |
Key Benefits of IOB Car Loan:
-
Competitive interest rates
-
Longer repayment tenure
-
Transparent terms and conditions
-
Loan coverage up to 85–90% of on-road price
🔹 Union Bank of India
Union Bank is another leading public sector bank providing affordable auto loans with a slight edge on EVs.
| Vehicle Type | Interest Rate |
|---|---|
| Electric Vehicles (EVs) | 8.20% |
| Petrol/Diesel Vehicles | 8.30% |
Key Benefits of Union Bank Car Loan:
-
Marginally lower rates for EVs
-
Quick processing and approval
-
Prepayment options available
-
Minimal documentation for salaried and self-employed individuals
⚖️ Interest Rate Comparison: At a Glance
| Bank | EV Interest Rate | Petrol/Diesel Interest Rate |
|---|---|---|
| Indian Overseas Bank | 8.15% | 8.35% |
| Union Bank of India | 8.20% | 8.30% |
👉 Verdict:
-
For EV Buyers: Indian Overseas Bank offers the lowest rate at 8.15%.
-
For Petrol/Diesel Cars: Union Bank has the better offer at 8.30%.
⚠️ Things to Consider Before Applying for a Car Loan
Before choosing a car loan provider, keep the following factors in mind:
-
Loan Tenure: Shorter tenure means higher EMI but lower total interest outgo.
-
Processing Fees: Some banks may charge 0.25% to 1% of the loan amount.
-
Prepayment Charges: Ensure the bank offers flexible prepayment or foreclosure without penalties.
-
Down Payment: Most banks finance 85% to 90% of the on-road price; the rest you pay upfront.
-
Credit Score: A better credit score increases your chances of loan approval with favorable terms.
📝 Documents Required for Car Loan
Whether salaried or self-employed, you’ll typically need:
-
KYC Documents: Aadhaar, PAN, Passport, Voter ID
-
Income Proof: Salary slips (for salaried), ITR or bank statements (for self-employed)
-
Vehicle Quotation from the dealer
-
Photographs
🔋 Why EV Buyers Get Lower Interest Rates?
In recent years, banks and the government have incentivized the adoption of electric vehicles due to their environmental benefits. EV loans often have:
-
Lower interest rates
-
Priority loan processing
-
Government-backed schemes or subsidies
So if you're planning to buy an EV, you can save not only on fuel but also on financing costs.
✅ Final Words
If you're ready to bring home your dream car in 2025, Indian Overseas Bank and Union Bank of India offer two of the best car loan interest rates currently available. Whether it’s a sleek petrol SUV or a modern EV, choosing the right loan at the right rate can make your ownership journey smooth and cost-effective.
So, compare your options, check your eligibility, and start the loan process to hit the road in your new car!
Tip: Always use a car loan EMI calculator to estimate your monthly payments before signing any deal.
