Bank vs NBFC Auto Loans: Which One Should You Choose?

Buying a car? Unless you're paying in full, you'll likely need a loan. In India, most people choose between banks and non-banking financial companies (NBFCs) for auto loans. 

Though both routes can help you get behind the wheel, they differ in important ways — from interest rates and processing time to who gets approved. Understanding these differences can save you money and help you choose the financing that best suits your profile. 

Also Read: Auto Loans in 2025: Interest Rates, EMI Trends, and What Banks Aren’t Telling You | Republic World

Bank auto loans

Banks like SBI, HDFC, and ICICI offer auto loans with lower interest rates, usually between 8.5% and 11%. They are a good option if you have a stable income, a good credit score, and can provide the required documents.

However, banks have stricter rules, and the loan process may take a few days. They usually finance up to 85–90% of the car’s value.

NBFC auto loans

NBFCs such as Bajaj Finance or Mahindra Finance are more flexible and faster. They may approve loans within 24–48 hours, even if your credit score is low or income is irregular. Some even offer 100% financing, including insurance and registration.However, there is a downside? Interest rates are higher, often between 10% and 18%. There may also be hidden charges like higher processing fees or prepayment penalties.

Which One is better?

Choose a bank loan if you want lower interest and have all the documents in place. However, go with an NBFC if you need quick approval or don’t meet strict bank criteria.

Final Decision

Compare the market offers, read the fine print, and calculate the total loan cost before deciding. The right loan should fit your budget — not just your timeline.