If you are planning to take a loan of ₹ 12 lakh to buy a new car and want EMI at the lowest interest rate, some public sector banks are still proving to be the most attractive option. Many major public sector banks have kept car loan interest rates quite competitive, starting from 7.40% in January 2026, especially for customers with good credit scores. Lower interest rate will not only reduce the monthly EMI but will also save a lot of total interest payment. Let us know the current rates of these banks.
Indian Overseas Bank
Public sector Indian Overseas Bank is currently offering loans for new cars at an interest rate of 7.60 percent per annum. This bank loan can be repaid in 84 equal monthly installments. Husband/wife, son, daughter, father, mother are eligible for bank loan (income of father and mother can be added to know the ability to repay the loan).
Canara Bank
If you want to take a car loan or vehicle loan from Canara Bank, then here we are offering you car loan or loan to buy a new tire at 7.95 percent per annum. There is no upper limit on the amount in car loan of this bank. Up to 90% financing is available for a new vehicle. There will be no pre-payment penalty. There is a facility of financing for the purchase of second and subsequent vehicles.
Union Bank of India
Union Bank of India is also currently offering car loan at an initial interest rate of 7.50 percent. If your CIBIL score is excellent and you fulfill the remaining eligibility criteria then you can get a car loan at such an affordable rate. You will have to pay a flat Rs 1000 plus GST processing fee on the loan taken to buy a new four-wheeler.
Bank of India
Public sector Bank of India is currently offering loan for buying a new car at an initial interest rate of 7.60%. The interest rate is calculated on daily reducing balance i.e. every decreasing balance. You may have to pay up to 0.25 percent of the loan amount as processing charge, which is fixed between Rs 2500 to Rs 10,000. If you are purchasing an electric vehicle, you will get a 50% discount on the applicable processing fees.
EMI of Rs 12 lakh for 4 years
If you have taken a car loan from Union Bank of India for 4 years at an initial interest rate of 7.50 percent, then according to the calculation, your monthly EMI will be Rs 29,014.68. According to the calculation, you will have to pay interest of Rs 1,92,704.75 on this loan. Will return a total of Rs 13,92,704.75 to the bank.
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