Car buyers are borrowing much more than they did seven years ago. According to reporting by Moneycontrol.com, a CIBIL report says car loan amounts have jumped 49% over seven years.
Repayment periods are getting longer too. For you, that usually means a smaller monthly EMI. It also means more total interest over the life of the loan.
Key takeaways
- Car loan amounts are up 49% in seven years, as reported by Moneycontrol.com.
- Borrowers are also choosing longer repayment periods.
- A longer tenure lowers your EMI but raises the total interest you pay.
- Check the total cost of the loan, not just the monthly amount.
- Prepaying when you can is a simple way to cut interest.
How a longer car loan works
An EMI is the fixed amount you pay every month until the loan is cleared. Each EMI has two parts. One part repays the loan amount. The other part is interest.
When you stretch the tenure, the loan amount is split over more months. So each EMI gets smaller. But the bank charges interest for more months too.
That's why a longer loan feels cheaper every month and costs more overall. Both things are true at the same time.
What changes for you: a worked example
Let's take a loan of ₹8 lakh at 9% a year. These are round, standing-style numbers to show the idea. Your actual rate may differ.
| Tenure | Approx. monthly EMI | Approx. total interest |
|---|---|---|
| 4 years | ₹19,900 | ₹1.56 lakh |
| 5 years | ₹16,600 | ₹1.96 lakh |
| 7 years | ₹12,900 | ₹2.81 lakh |
Moving from five years to seven cuts your EMI by about ₹3,700. But you pay roughly ₹85,000 more in interest.
You can test your own numbers with the EMI calculator. Try three or four tenures and compare the totals.
Who is affected
First-time buyers feel this most. A big loan on a modest salary can look easy when the EMI is low. It's harder when other costs pile up.
Salaried borrowers with other loans should be careful too. Lenders look at how much of your income already goes to EMIs. A big car EMI can reduce what you can borrow later for a home or a personal need.
If you're planning a home loan in the next few years, a long car loan may hold you back. It's worth thinking about before you sign.
What to do before you take a car loan
A little planning can save you a lot of money. Here's a simple checklist:
- Decide a comfortable EMI first, then work out the loan size.
- Pay as large a down payment as you can.
- Ask for the total interest cost on two or three tenures.
- Compare offers using the latest interest rates.
- Check if the lender charges a fee for part-payment or early closure.
- Look at your eligibility before you visit the showroom.
As a rough guide, many people try to keep all EMIs well under half of their monthly income. Lower is safer.
Need money for something small? Read our personal loan guides first. Don't stack more debt on top of a car loan. Stacking loans raises your monthly pressure fast.
Frequently asked questions
Is a longer car loan tenure a bad idea?
Not always. It lowers your monthly EMI, which helps if cash is tight. But you'll pay more interest in total, so choose the shortest tenure you can manage.
Can I repay my car loan early?
Yes, most lenders allow it. Some charge a small fee for early closure or part-payment. Ask about this before you sign, and get it in writing.
Does a bigger car loan hurt my credit score?
Taking the loan doesn't hurt you if you pay on time. But a large EMI can make it harder to get other loans. Missed payments will lower your score.
BankCreds analysis
The headline is less scary than it sounds
A 49% jump over seven years isn't all new debt stress. Car prices rose in that time. Safety features and bigger models cost more too.
The real worry is the tenure. Take a ₹8 lakh loan at 9%. Going from five years to seven saves about ₹3,700 a month. It also adds roughly ₹85,000 in interest.
A longer loan suits you only if your income is tight. If your salary will likely grow, take the shorter one. You can always prepay later. You can't undo extra interest once it's charged.
Don't read this report as a sign that lenders are loosening up. It simply shows what buyers are choosing.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Source & references
- Moneycontrol.com — originating report https://www.moneycontrol.com/news/business/personal-finance/car-loan-amounts-jump-49-in-seven-years-repayment-tenures-get-longer-cibil-report-14050964.html/amp
Source links are shown as plain text, not clickable links. Copy a URL into your browser to read the original report.
Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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