Know all about your monthly car payments with Car Loan EMI Calculator: How to calculate, benefits, factors responsible and all!
Thinking to get a new car you have always wanted to? Learning materials that you will require in this journey include a Car Loan EMI Calculator. Actually no matter if you are approaching car financing for the first time or thinking of a upgrade, it makes sense to know how your monthly car loan repayments – also called Equated Monthly Instalments or EMIs – are calculated. Here, you will truly learn what exactly the car loan EMI calculators in India are all about, how it works and some things you need to know when using it.
What do you mean by a Car Loan EMI Calculator?
Car Loan EMI Calculator actually is a tool which gives an estimate of the monthly repayment for car loan online. EMI depends upon the loan amount, rate of interest and period of pay back in other words loan tenure to arrive a particular EMI figure. If you input these values you can see the breakdown of monthly car loan repayments ensuring that you are well prepared before going for a car loan.
How Does the EMI Calculator Help?
A Car Loan EMI Calculator India uses the EMI reducing balance formula that is Reducing Balance Method followed by all the India banks and NBFCs. This formula takes factors the interest on the principal amount which reduces with time as one clears his/her loan balance.
Where:
P = Principal loan amount
r = (1 + k) / k where k = Annual interest rate divided by 120
n = Loan tenure in months
This might look complicated, but there’s a special online EMI calculator that performs all the calculations for you. In this tool you just have to enter loan amount, tenure in years, and then the EMI calculates within a blink of an eye.
Advantages of a Car Loan EMI Calculator
Therefore, there are so much benefits in using an EMI calculator and especially if one is not very keen on loans. Here’s why an EMI calculator can be a game-changer:
1. Quick and Easy Calculations
EMI calculations done manually are time-consuming and can be…well a little complicated. An EMI calculator online enables you to input the basic information and it returns you an EMI amount within few seconds.
2. Clear Financial Planning
It is beneficial knowing how much EMI you are going to pay in advance regarding your financial planning. It helps to determine whether the given loan and resulting interest meet your income and monthly expenditures at the moment.
3. Better Loan Comparison
An EMI calculator helps you to understand the loan offers provided by bank. At this time, you can change the interest rate and loan amount to determine which offer will deliver the best deal of EMI.
4. Helps in Setting Loan Tenure
If you change the tenure on the EMI calculator, one can predict changes in EMI with respect to its tenure. Lower tenure has steep EMI and less interest amount while higher tenure has low EMI but more interest payable.
5. Decision-Making Tool
For the first-timers, the EMI calculator can be quite revealing in regard to how much they are capable of actually paying. It plays an important role of supporting the decision making process by giving an overall view of the financial undertaking in car loan.
A brief overview of calculating car loan EMI with the help of car loan EMI calculator is given as following.
It is quite easy to use actually an online Car Loan EMI Calculator. Here’s a quick step-by-step guide to actually get you started:
Enter the Loan Amount: This is the total amount you identify you will like to borrow. For example, when comparing different loan amounts, you can use whatever numbers you desire to calculate the EMI.
Enter the Interest Rate: Input the annual percentage rate given by your lender to attract new business. This is in the case that most of the calculators will give the annual rate this and turn it to the monthly rate when making the calculations.
Select Loan Tenure: Select the number of years you need to complete the repayment of the loan. This is can be from 1 – 7 years.
Click Calculate: The tool will help you see the EMI amount which would be required to pay monthly right away.
Most calculators also provide a tabular record of every EMI payable throughout the period, and then calculate the interest portion and the principal portion.
Example of a car loan EMI calculation
There is one simple formula for actually calculating car loan EMI with truly the help of the Car loan EMI calculator. For example, suppose you want to purchase a car of ₹800000. Here’s how an EMI Calculator can help you explore your options:
Loan Amount: ₹3,00,000 (if you pay a ₹2,00,000 down payment)
Interest Rate: 8% per annum
Loan Tenure: 5 years (60 months)
With the help of a calculator that we have EMI calculator, it gives Approximately ₹12,167/- as an EMI amount per month. This means you will need to save about ₹12,000 for a month and pay it as a monthly installments for the next 5 years without straining.
Factors that determine Your Car Loan EMI
Several factors can impact your monthly EMI amount, so it’s essential to understand these variables to make the best decision:
1. Loan Amount
By the same token, if the loan amount borrows is high, then the EMI value will also be high. If possible make a down payment in order to bring down the amount of money you are likely to borrow.
2. Interest Rate
You can find that even a half a percentage point difference in the interest rate can result in a huge amount difference in your EMI. Rates that need to be compared are easily available to find the best combination of rate and terms with the lender.
3. Loan Tenure
A longer tenure reduces your EMI but at the same time the total interest one will have to pay will also be higher. Select a tenure that is affordable while also meaning a low interest cost.
4. Prepayment Option
There are some loans that it is allowable to pay before the due date and hence, you can take the advantage to pay a less interest in relation to the amount that you borrowed.
Ways to pay lesser EMI on your car loan
If you’re finding it challenging to manage a high EMI, here are some ways to potentially reduce your monthly payments:
- Choose a Lower Loan Amount: EMI or Equated Monthly Installments can be reduced by either taking a smaller loan or giving a bigger down payment.
- Negotiate for a Better Interest Rate: Lower interest means smaller EMI. In as much as these are good advises, one should try to talk with the lending company if this is possible.
- Extend the Loan Tenure: Reduction in EMI can be had by stretching your loan tenure but then you end up paying a lot more in terms of interest. Make sure you are okay with the total interest outflow before going for this one.
- Consider Prepayment: Where possible prepay some of the loans so as to pay a some of the principal outstanding in order to reduce the subsequent EMI.
FAQs
1: Is a car loan EMI calculator free to use?
Yes, the majority of banks and financial website provide EMI calculators at no cost, hence making planning a possibility at no added cost.
2: Are the results of EMI calculators accurate?
This mean that EMI amount shown by calculators is an approximate figure arrived out of the given details. Standard computed EMIs may slightly differ from actual ones due to the conditions set by the lending company.
3: Is it possible to modify the loan amount after you have applied the EMI calculator?
Absolutely. The calculator makes it possible to give different loan amounts, tenor and interest rate in order to arrive at an affordable EMI for the client.
Also Read: Financial Planning to Buy Your Dream Car
