State Bank of India vs. Union Bank of India: Which Car Loan is the Best Choice in 2025?

When you're in the market for a new car, one of the most important decisions you’ll need to make is how to finance it. Fortunately, both State Bank of India (SBI) and Union Bank of India (UBI) offer competitive car loan options. These loans come with attractive features, low interest rates, and flexible terms that can make your dream car more affordable. However, choosing between these two options can be a little tricky, especially with all the different terms and features to consider. In this post, we’ll take a deep dive into the car loan offerings of both banks in 2025 and compare them to help you make a well-informed choice.

SBI Car Loan Features: A Closer Look

State Bank of India is one of the most trusted names in the country when it comes to banking. Their car loan offerings are designed to provide customers with the best possible deal, combining low interest rates with flexible terms and quick loan disbursement. Let's explore the key features of SBI’s car loan offering:

Key Features of SBI Car Loan:

• Lowest Interest Rates & EMI: One of the standout features of SBI car loans is the attractive interest rates they offer, which are among the lowest in the market. This means that your monthly EMI will be affordable, helping you manage your finances better.
• Longest Repayment Tenure: SBI offers a long repayment period, up to 7 years, making it easier for you to spread the cost over a longer period, which helps in reducing the EMI burden.
• On-Road Price Financing: SBI finances up to 100% of the on-road price of your car, which means you can include the car's registration charges and insurance costs in the loan amount, making it a more comprehensive loan package.
• Interest Calculation on Daily Reducing Balance: Interest is calculated on a daily reducing balance, which means you pay interest only on the remaining loan amount, making it cheaper in the long run.
• No Prepayment Charges: One of the best features of SBI’s car loan is the no prepayment charges after two years, giving you the flexibility to pay off your loan early without any extra cost.
• No Advance EMI: SBI does not require you to pay an advance EMI, which makes the loan process simpler.
• Optional SBI Life Insurance: An optional insurance cover is available, providing additional protection for your loan in case of unexpected circumstances.
• Eligible for New Cars: This loan can be used for purchasing new passenger cars, SUVs, and MUVs, giving you a wide range of options to choose from.

Flexi Pay Option: SBI also offers a Flexi Pay option, allowing borrowers to reduce their EMI payments for the first few months of the loan. The two available options are: Option 1: For loans with a tenure of at least 36 months, the first 6 months’ EMI is 50% of the regular EMI. Option 2: For loans with a tenure of 60 months or more, the first 6 months’ EMI is reduced to 50%, followed by the next 6 months at 75% of the regular EMI.

Eligibility Criteria for SBI Car Loan: SBI offers car loans to a wide variety of individuals. Here are the basic eligibility criteria: Salaried Employees: You should have a net annual income of at least ₹3,00,000 to qualify for a loan of up to 48 times your net monthly income. Self-Employed Individuals: Professionals, businessmen, and other self-employed individuals with a taxable income of at least ₹3,00,000 per annum are eligible for loans up to four times their annual income. Agriculturists: Farmers with an annual income of at least ₹4,00,000 can also avail of the loan, with a maximum loan of three times their net income.

 

Documents Required: Salaried Individuals: You’ll need to submit your bank statement for the last 6 months, 2 passport-sized photographs, proof of identity and address, income proof (latest salary slip, Form 16), and ITR/Form 16 for the last 2 years. Self-Employed Individuals: In addition to the above documents, you’ll also need to submit your income tax returns (ITR), balance sheet, and P&L statement for the last 2 years. Agriculturists: For farmers, proof of land ownership and agricultural activity, such as Khasra or Chitta Adangal (showing cropping patterns), will be required.

Interest Rates:

The interest rates for SBI car loans range from 9.20% to 10.15%, depending on your Credit Information Report (CIC) score. SBI also offers special rates for electric cars under their Green Car Loan Scheme, with interest rates starting at 9.10%.

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Union Bank of India Car Loan Features:

Union Bank of India is another strong contender when it comes to car loans. UBI’s vehicle loan offering is designed to make the car buying process easy and quick, with minimal paperwork and competitive interest rates. Here's a closer look at what UBI has to offer:

Top Features of Union Bank of India Car Loan: Personal & Professional Loans: UBI offers loans for both personal use (new and old 4-wheelers, new 2-wheelers) and professional use (for companies/firms purchasing vehicles for their employees or directors). Minimal Paperwork: UBI focuses on reducing the paperwork involved, which means a faster and more streamlined loan application process. Quick Disbursement: Once your loan is approved, UBI ensures quick disbursal of funds, so you can purchase your vehicle without unnecessary delays.

 

Eligibility Criteria for UBI Car Loan: Eligibility Age: The applicant should be between 18 and 75 years old. Citizenship Criteria: The loan is available to Resident Indians as well as Non-Resident Indians (NRIs). Co-Applicants: The loan can be applied for singly or jointly with up to two co-applicants.

 

Documents Required: Identity Proof: PAN card, passport, voter ID, or driving license can be used as proof. Proof of Address: Electricity bill, telephone bill, ration card, or rent agreement. Bank Statements: Provide bank statements from the last 6 months. For Self-Employed Individuals: You’ll need to provide your income tax returns (ITR-3 or ITR-4) for the last two years.

 

Repayment Tenure: New 4-Wheeler: Repayment tenure can go up to 84 months. Old 4-Wheeler: Repayment tenure is up to 60 months.

 

Interest Rates:

Union Bank’s car loan interest rates range from 8.75% to 10.70% for new car loans and 12.70% to 12.80% for used car loans.

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Comparison: SBI vs. Union Bank of India Car Loans

Let’s break down the key differences between the car loans offered by State Bank of India and Union Bank of India:

Feature	SBI Car Loan	Union Bank of India Car Loan
Interest Rate	From 9.20% to 10.15%	From 8.75% to 10.70% (New Car)
Loan Tenure	Up to 7 years	Up to 7 years for new 4-wheelers
On-Road Price Financing	Up to 100% of on-road price	Up to 85% of on-road price
Prepayment Charges	No prepayment charges after 2 years	Prepayment charges apply after 1 year
Processing Fee	Applicable (check with the bank for details)	Applicable (check with the bank for details)
Flexi Pay Option	Available (reduced EMIs for the first 12 months)	Not available
Documents Required	Extensive documentation for salaried, self-employed, and agriculturists	Similar documentation requirements
Loan Type	New passenger cars, MUVs, SUVs, electric vehicles	New & used 4-wheelers, 2-wheelers, professional use

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My View: Which Loan is Right for You?

Both SBI and UBI offer competitive car loans with attractive interest rates and flexible terms, but your choice ultimately depends on your personal preferences and needs. If you’re looking for the lowest interest rates, a longer repayment period, and flexible payment options, SBI is a great choice. Additionally, SBI’s option to finance up to 100% of the on-road price, including registration and insurance, makes it an even more attractive option for new car buyers.

However, if you value quick disbursal, minimal paperwork, and a simpler loan application process, Union Bank of India may be more up your alley. Their interest rates are slightly lower for new car loans, and the quick disbursal of funds ensures that you won’t be left waiting for long.

In the end, both banks have their own set of advantages, and your decision should be based on factors such as the interest rate, the loan tenure, and the documents required. It’s important to do your research, compare all the terms carefully, and choose the loan that best fits your financial situation.

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Common Questions about Car Loans from State Bank of India and Union Bank of India

1. What is the eligibility age for car loans from SBI and Union Bank of India?

To apply for a car loan from both SBI and Union Bank of India, applicants must be between the ages of 18 and 75 years. This age range ensures that both young professionals and older individuals have the opportunity to avail themselves of a car loan, provided they meet other eligibility criteria such as income and employment status.

2. What are the interest rates on car loans from SBI and Union Bank of India?

SBI offers car loan interest rates starting from 9.20% to 10.15%, depending on factors such as the applicant's credit score and loan tenure. On the other hand, Union Bank of India offers slightly more competitive rates for new car loans, ranging from 8.75% to 10.70%, while the rates for used cars may be slightly higher, ranging from 12.70% to 12.80%. These rates are subject to change based on market conditions and the applicant's credit profile.

3. Can NRIs apply for a car loan?

Yes, both SBI and Union Bank of India offer car loans to Non-Resident Indians (NRIs). NRIs can enjoy the same benefits as Resident Indians, such as competitive interest rates and flexible loan tenures. However, NRIs will need to meet specific documentation requirements, such as providing proof of income from abroad, along with identity and address proof.

4. What documents are required for a car loan application?

To apply for a car loan, applicants must submit various documents. These typically include proof of identity (like a PAN card, passport, voter ID, or driving license), proof of address (such as a utility bill, ration card, or rent agreement), and bank statements for the last 6 months. Additionally, salaried individuals need to submit income proof like salary slips, Form 16, or ITRs, while self-employed applicants must provide their income tax returns for the last 2 years. These documents help the bank assess your financial stability and loan repayment capacity.

5. What is the loan tenure for car loans?

SBI provides a loan tenure of up to 7 years for car loans, which offers borrowers flexibility in managing their repayments. Union Bank of India also offers a loan tenure of up to 84 months for new cars. For used cars, the maximum tenure is 60 months. A longer tenure can help reduce your monthly EMI, making the loan more affordable, but it may result in higher overall interest payments.