Electric Vehicle (EV) Car Loan: The Complete Guide

What is an EV Car Loan?

An EV car loan is financing provided by banks or NBFCs specifically for electric vehicles, often with special incentives or favorable terms.

Just like a regular car loan, an EV car loan helps you spread out the cost of buying an electric car into manageable EMIs. The key difference is that many banks now offer special “green car loan” schemes for EVs. These loans sometimes come with slightly lower interest rates, flexible repayment options, or waived foreclosure charges to encourage eco-friendly purchases.

What makes EV car loans different from regular car loans is the nature of the vehicle itself. Since electric cars involve unique considerations like battery cost, charging infrastructure, government subsidies, and resale value, lenders evaluate them differently. Some banks require proof of battery warranty or dealership tie-ups before sanctioning. Others directly link loans to state or central subsidies (like the FAME India scheme), making EV financing more affordable.

In short: an EV car loan is not just about borrowing money - it’s part of India’s larger push towards sustainable mobility.

Read: Complete Guide to Car Loan Process in India (2025)

Why Choose an EV Loan? Benefits & Incentives

EV loans offer lower running costs, government subsidies, lower interest rates in some cases, and environmental benefits.

Here’s why an EV loan can be attractive:

1. Government incentives: The central government’s FAME II scheme and state-level EV policies provide subsidies, road tax exemptions, or registration fee waivers that directly reduce your upfront cost.
2. Lower running costs: Electricity is cheaper than petrol/diesel, and EVs have fewer moving parts, meaning less wear and tear. This translates to lower fuel and maintenance bills.
3. Possible tax benefits: In India, under Section 80EEB of the Income Tax Act, borrowers can claim up to ₹1.5 lakh deduction on interest paid on EV loans (only for individuals, not businesses).
4. Green financing benefits: Some banks (e.g., SBI, Bank of Maharashtra) offer reduced interest rates for EV loans compared to ICE (internal combustion engine) car loans.
5. Environmental benefits: Beyond finances, choosing an EV reduces your carbon footprint and supports the shift towards sustainable transportation.

So, an EV loan isn’t just a way to buy a car, it’s a way to save money long term while aligning with India’s clean energy goals.

What is the Eligibility Criteria for EV Car Loan in India?

Eligibility depends on age, income, credit score, cost of the EV, subsidy eligibility, etc.

While criteria vary by lender, most banks follow a similar pattern:

1. Age: Usually between 21 and 65 years at loan maturity.
2. Employment & income: Salaried, self-employed, or business professionals with a minimum monthly income (commonly ₹20,000-₹25,000+ for salaried).
3. Credit score: CIBIL score of 700+ is generally preferred.
4. Vehicle-specific checks: EV must be purchased from an authorised dealer, and banks may require proof of battery warranty or manufacturer tie-ups.
5. Documentation: Standard KYC (Aadhaar, PAN, proof of residence), salary slips/ITR for income proof, and bank statements. Check here the Complete checklist of Documents Required for New Car Loan.

Special criteria for EVs - Some banks also look at:

• Charger Installation: Confirmation of a home or public charging arrangement.
• Subsidy Eligibility: Linking with FAME II or state-level subsidy documents.

Interest Rates & Types of Financing for EVs

Interest rates for EV loans are often competitive, sometimes lower than ICE car loans; financing types can include full funding, subsidised/green loans.

1. Interest rates: As of 2025, many banks price EV loans at 8-9% p.a., which is slightly lower than regular car loans. For example, Indian Overseas Bank offers ~8.15% for EVs vs 8.35% for non-EVs (The Economic Times).
2. Loan tenures: Typically range from 1 to 7 years, similar to regular car loans.
3. Loan-to-value (LTV): Some banks finance up to 85-90% of the on-road price, while certain green loan schemes cover the entire on-road cost including chargers and insurance.
4. Special green loan schemes:

• Bank of Maharashtra - Maha Super Green Car Loan: No prepayment charges, covers EVs only, and comes with attractive interest rates.
• SBI Green Car Loan - Lower EMI options, tied to eco-financing.

Besides traditional car loans, some NBFCs and fintechs also offer lease financing or subscription models for EVs, which bundle loan repayment, insurance, and maintenance into one plan.

Process & Documentation Required for EV Car Loan in India

The process involves application, verification, EV dealer/vehicle specifics, subsidy processing, and disbursement; documentation includes ID, income proof, KYC, bank statements, and EV-related documents.

Step-by-step process for EV Car Loan:

1. Loan application: Submit your application online or at the bank branch.
2. Vehicle details & dealer quote: Provide the proforma invoice from the authorised EV dealer, including on-road cost and battery details.
3. Document submission: Share ID, address proof, income proof, and bank statements.
4. Bank Evaluation: The lender checks your credit score, income stability, and EV eligibility.
5. Vehicle inspection/dealer submission: Some banks coordinate directly with the EV dealer for verification.
6. Subsidy processing: If you’re applying under FAME II or state EV policy, documents are linked at this stage.
7. Loan Sanction: Once verified, the bank issues a sanction letter with amount, interest rate, and tenure.
8. Disbursement: Funds are transferred to the dealer or directly towards the EV purchase.

Common documents required for EV Car Loan in India

• KYC documents - Aadhaar, PAN, passport, or voter ID.
• Income proof - Salary slips (salaried), IT returns (self-employed).
• Bank statements - Last 6 months.
• Proforma invoice - From the EV dealer with vehicle details.
• Insurance papers - Pre-purchase insurance if required.
• Subsidy forms - For claiming central or state EV incentives.

Check here the complete list of Documents required for car loan in India

What are the Charges, Fees & Additional Costs in EV Car Loans in India:

Besides interest, EV car loans may have processing fees, insurance, battery-related costs, higher down payments, and hidden expenses like charger installation.

Typical charges to expect:

1. Processing fees: Usually 0.25%–1% of the loan amount, depending on the bank.
2. Down payment: Some lenders may require a higher margin for EVs due to higher upfront costs.
3. Insurance premium: EV insurance tends to be costlier than petrol/diesel cars because of expensive battery replacement.
4. Battery costs: While covered under warranty, banks may factor in future depreciation of batteries while sanctioning.
5. On-road charges: Road tax and registration are often waived in many states for EVs, but confirm for your state.
6. Charging infrastructure: If you install a home charger, expect additional costs of ₹50,000–₹1,00,000 depending on model and provider.

Subsidies can help offset some of these expenses, but borrowers should still budget for these add-ons before applying for an EV loan.

Know about your Pending Challan and RC details.

Comparing EV Loan vs ICE Car Loan

While ICE car loans are more familiar and widely available, EV loans are catching up with incentives, competitive rates, and green financing schemes, but buyers must consider battery life, resale, and charging infrastructure.

EV loans make ownership more affordable long-term, while ICE car loans remain easier to get approved due to familiarity and stable resale value.

What are the Common Pitfalls & How to Avoid Them

Many EV loan applicants overlook subsidy eligibility, underestimate charging and battery costs, or choose vehicles without considering long-term needs.

Key pitfalls to avoid:

1. Ignoring subsidy rules: FAME II and state incentives often have eligibility criteria; missing paperwork can cost you benefits.
2. Underestimating charging needs: Not planning for home charging setup or relying only on limited public chargers.
3. Battery warranty confusion: Forgetting to check if the battery warranty covers the full loan tenure.
4. Overlooking resale value: EV resale is still maturing in India; choosing models with weak demand may impact trade-in value.
5. Not comparing lenders: Many banks now offer EV-specific schemes, picking the first available loan may cost you more in the long run.

A little extra research on subsidies, warranty, and financing options can save significant money and hassle.

Frequently Asked Questions on EV Car Loans:

Q: What is EV car loan eligibility in India?

A: Most banks require you to be 21-65 years old, with a stable income, good credit score (700+), and purchasing an EV from an authorised dealer.

Q: Do EV car loans have lower interest rates?

A: Yes, many lenders offer green loan schemes with slightly lower rates for EVs compared to petrol/diesel cars.

Q: What subsidies are available when financing EVs?

A: Central government’s FAME II subsidy plus additional state-level incentives like road tax exemption and registration fee waiver.

Q: Is insurance cost higher for EVs?

A: Yes, insurance premiums are usually higher due to battery replacement costs, but subsidies and savings on fuel offset this.

Q: What happens in resale or trade-in with EVs?

A: Resale values are still evolving and depend heavily on battery health and warranty coverage.

Q: Does battery warranty affect loan sanction?

A: Yes, banks often require minimum battery warranty proof before approving loans, as it impacts resale and risk.