Why an EV Loan is the Future of Smart Borrowing
Switch to smarter, greener commuting with an electric vehicle loan. Know how EV loans, tax benefits in India & green car loans make eco-friendly choices affordable.
Anjali Singh
Assistant Manager
In the process of purchasing an automobile, achieving a dream that is close to many, we forget to take all our options into consideration, such as “Should I buy an EV or a normal car?” or whether or not we should get it financed through an Electric Vehicle Loan.
Today, we’ll break down the process and make the decision-making process easy for you.
What is an EV Loan (Electric Vehicle Loan)?
Let us first understand what an EV Loan even is. An Electric Vehicle Loan also known as a green car loan, is a financial product that a borrower may opt for in the event that he or she decides to purchase an electric vehicle.
Advantages of a Green Car Loan
- Lower Interest Rates: An EV Loan is inherently less expensive, typically comes with interest rates that are 0.25% to 1% lower than regular car loans.
- Lower Risk for Lenders: EVs are considered low-risk because they show less wear and tear and have reliable battery life, leading to more affordable loans.
Know the Tax Benefits of an Electric Vehicle Loan in India
At the introduction of EVs into the markets of India, the central as well as state governments released a large number of incentives to attract customers, such as tax exemptions and subsidies, in both the cost of the electric vehicle and the payable interest.
The central government, in accordance with section 80EEB of the Income Tax Act, offers a tax deduction on interest paid up to 1,50,000 on the purchase of an Electric Vehicle only.
These tax rebates and other small incentives have influenced buyers to shift from petrol/diesel vehicles to the more sustainable EV (electric vehicle) option.
Why Green Car Loans are a Better Choice for the Future
Other than the fact that an EV is easier on the wallet, there are a few other positives to purchasing an EV:
1. The cost of charging an EV is less costly than filling a tank of Petrol/Diesel.
2. An EV Battery needs less maintenance on average as compared to other car engines.
3. EVs do not require a Pollution Under Control (PUC) Report as they do not emit exhaust gases.
4. EVs reduce the overall amount of noise pollution in an area.
5. While the initial cost incurred of owning an EV may be higher, the overall savings accumulated over the lifespan of the vehicle more than make up for the slightly higher price tag.
6. As an EV Loan is a secured loan, it entails all the benefits of a secured loan, such as lower interest rates, longer loan tenures, a choice between fixed rate and variable rate, and it also increases your credit score if the installments are consistent.
Who is Eligible for Electric Vehicle Loan?
1. Applicant must be between 21-65 years of age
2. Applicant must not be above 65 years at the end of the loan term
3. Applicants must have a minimum income of 3L per annum
4. Borrowers must have a credit score (CIBIL) of 730-900.
5. Borrowers must be able to produce PAN card, Aadhar card, and proof of residence on demand.
My Mudra offers a seamless loan procurement experience by connecting you with top banks.
Comparison of EV Loans Offered By Different Banks
|
Bank Name |
Interest Rate |
Loan Amount |
Tenure |
Processing Fee |
|
HDFC Bank |
From 9.20% |
=< 10 Cr. |
12-96 months |
1% |
|
ICICI Bank |
From 9.10% |
=< 30 L |
Up to 96 months |
2500-5000 |
|
Axis Bank |
From 9.20-13.90% |
Up to 85% of total cost |
12-84 months |
3500-12000 |
|
Kotak Bank |
From 7.35-14.00% |
Up to 100% of on road price |
12-84 months |
2.50% |
|
SBI Bank |
From 9.10% |
Up to 90% of total cost |
Up to 96 months |
1000 + GST |
Steps to Apply for an Electric Vehicle Loan
- Choose a bank to which you will apply for an EV Loan
- Decide the loan amount and tenure
- Provide CIBIL score, PAN card, proof of residence and other relevant documents.
- Make it apparent to the bank that you will be able to repay the loan.
- Await approval.
Common Mistakes to Avoid While Applying for an EV Loan
- Not knowing your credit score(CIBIL score)
- Missing loans installment payments
- Ignoring the hidden fees or failing to read the fine print
- Not being adequately liquid to afford an EV loan
- Making the tenure unnecessarily lengthy
- Choosing incorrect lenders
- Applying to multiple lenders at once
Why should you choose My Mudra for EV Loan?
With the increasing and growing popularity of EV’s in India, many banks have started offering EV Loans which might make the task of choosing the best loan a daunting task. My Mudra makes the process of choosing an EV Loan easy by explaining the nuances of each, making it easy to come to a decision between an EV Loan and a traditional car loan.
Also Read:
- How Green Finance Can Be a Sustainable Choice for Your Home
- Why Choose a Personal Loan to Buy a Car in India?
Frequently Asked Questions
Q1. What is the best Bank for EV loans?
Ans: EV Loans provided depend on the needs of the borrower, making it difficult to designate a bank as the best EV Loan provider. But some highly regarded EV Loan providers are GDFC Bank, ICICI Bank, and Union Bank of India.
Q2. What is the interest rate for an EV loan?
Ans: The interest rates levied on an EV Loan differ between banks, but they commonly range from 8.70%-9.20%.
Q3. How is an EV loan different from a regular car loan?
Ans: An EV Loan is a loan created specifically to finance an electric vehicle.
Q4. Will my CIBIL score impact my electric vehicle loan approval?
Ans: An EV loan is a loan at the end of the day; therefore, a strong credit score will help you immensely in procuring a loan.
Q5. What is the average loan tenure for electric vehicle loans?
Ans: An EV Loan lasts on average between 5-7 years, but may be extended up to 8 years.
Q6. What is the future outlook for EV financing in India?
Ans: With the release of newer and more efficient EV models, the lobby behind EV growth only grows in popularity, and the use of EVs as transport will only become more widespread.
Anjali Singh
Assistant Manager
Hey there, I'm Anjali Singh. With over 6 years of experience in finance, I specialize in creating content on banking, loans, and financial planning. My goal is to simplify complex financial topics and help readers make informed decisions through my articles.
