How To Borrow Against Your Car Without Giving It Up

Many banks and non-banking finance companies (NBFCs) in India offer loans against vehicles, allowing you to borrow money by pledging your car as collateral

Your vehicle acts as collateral. As long as EMIs are paid on time, you retain full use of the car

Source : ABPLIVE AI

Financial setbacks or emergencies often arise without warning. When faced with such situations, many people consider selling their assets—like their car—to raise funds. But did you know you can use your car to get funds without having to sell or part with it?

While a car is a depreciating asset, it can still help during difficult times. Many banks and non-banking finance companies (NBFCs) in India offer loans against vehicles, allowing you to borrow money by pledging your car as collateral. Being a secured loan, it is typically faster and more accessible than unsecured personal loans. 

Let’s learn more about how this loan works.  

Does Your Car Qualify?

To get a loan against your car, first check if it qualifies as collateral. Most lenders require the car to be privately owned, fully paid for, and in running condition. Old, discontinued, or commercial vehicles, as well as those under dispute, are usually not eligible. For example, Axis Bank and Mahindra Finance accept cars up to 10 years old, while RBL Bank allows cars up to 12 years old. However, it’s best to confirm the specific eligibility criteria with the lender before applying.

How Much Can You Borrow?

The loan amount offered will depend on your credit profile (income, credit score, age, etc.) and the vehicle’s valuation, typically carried out by the lender. Loan amounts, across various lenders, range from 50% to 200% of the car’s value. There are usually no restrictions on the end use of the funds, which can be used for weddings, an emergency, to cover medical expenses, etc. 

What’s The Interest Rate? 

Interest rates vary across lenders. For instance, IDFC FIRST Bank offers loans at 14.49% p.a., Bajaj Finserv between 10% and 19% p.a., and Axis Bank between 15.5% and 17.5% p.a. HDFC Bank offers loans against cars at a rate 2% lower than their personal loan rate. Processing fees also vary, ranging from 1% to 2.95% of the loan amount.

How Will Your Car Be Valued?

Valuation is typically done by the lender. Some require a thorough physical inspection, while others may accept third-party assessments. A few banks offer pre-approved loans without fresh valuation, speeding up disbursal.

Repay On Time To Keep The Car

Your vehicle acts as collateral. As long as EMIs are paid on time, you retain full use of the car. However, defaults can lead to repossession and sale by the lender to recover dues.

Loans against cars are a useful option when you need funds quickly and don’t want to sell your vehicle. They’re often cheaper than personal loans or credit card debt, especially for borrowers with regular income and repayment discipline. Still, as with any loan, review the terms carefully and choose a tenure that suits your finances.

(The author is the Senior Manager – Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)