What you need to know
Floating car loans (PNB, Bank of Baroda, Union Bank, Canara) move with the bank’s repo-linked benchmark; fixed loans (HDFC, ICICI, Axis, and fixed options at PNB and BoB) keep the same rate for the whole tenure. The biggest practical difference is prepayment: no charge on floating loans to individuals, 2% – 6% on many fixed loans.
Rate type by bank
| Lender | Rate type | Prepayment / foreclosure |
|---|---|---|
| SBI Car Loan | MCLR-linked (3-month MCLR 8.25%) | No prepayment charge; foreclosure charge waived after 2 years |
| Canara Bank Car Loan | Repo-linked (RLLR 8.00%) | No prepayment penalty |
| PNB Car Loan | Floating (RLLR 8.10%) or fixed | Floating nil; fixed 2% |
| Bank of Baroda Car Loan | Floating (BRLLR) or fixed | Floating nil; fixed 2% above ₹40,000 in first 2 years |
| Union Bank of India Car Loan | Floating (EBLR 8.00%) | Nil |
| HDFC Bank Car Loan | Fixed | 6% / 5% / 3% by loan age |
| ICICI Bank Car Loan | Fixed | 3% / 2%, nil after 24 months |
| Axis Bank Car Loan | Fixed | 5% |
Comparison
Advantages
- Floating: usually lower starting rate today; falls when the repo rate is cut; free prepayment for individuals
- Fixed: EMI certain for the whole loan; protected if rates rise
Limitations
- Floating: EMI or tenure rises if rates go up
- Fixed: foreclosure charges; no benefit from repo cuts
RBI protections on resets
| Protection | What it means for you |
|---|---|
| Key Facts Statement (KFS) | Mandatory for all retail and MSME term loans since 1 Oct 2024; shows the all-inclusive Annual Percentage Rate (APR), EMI schedule and every fee |
| Charges not in KFS | Cannot be levied without your explicit consent |
| Validity | At least 3 working days for loans of 7 days or more — time to compare offers |
| Floating-rate reset (RBI, Aug 2023) | At a rate reset you can choose a higher EMI, a longer tenure (without negative amortisation), switch to fixed rate, or prepay; you get quarterly statements |
Frequently asked questions
Which should I choose in 2026?
With the repo rate at 5.25% and most car loans lasting 3 – 5 years, a floating PSU loan is often cheaper and lets you prepay free. Choose fixed if a steady EMI matters more and you will not prepay.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.