What is Car Loan EMI?
A car loan is one of the various types of secured loans taken from a bank or financial institution for buying a car. Owning a car has almost become a necessity in today’s fast-paced world. You can either opt for a new car or a used one. Your budget plays a vital role in determining the car, the downpayment you can afford and the amount you require as a loan. You can repay the loan in a pre-agreed tenure in affordable EMIs. If you default on the loan, your credit score will fall, and the lender could seize the car to make up for their loss. Banks offer car loans at affordable interest rates and tenures without you having to stretch your budget. The car loan EMI is made up of the principal and interest portion of the loan. The EMI would remain fixed throughout the loan and would be repaid through instalments each month.
What is a Car Loan EMI Calculator?
The Car Loan EMI Calculator is a utility tool that helps you to determine the equated monthly instalments you must pay the lender, throughout the car loan. You get to know the amount you must borrow, the interest rate and the Car Loan EMIs over the tenure of the loan before you walk into the bank. This tool consists of a formula box that has three sliders, namely Loan Amount, Loan Tenure, and the Interest Rate. Once you fill in the details, the Car Loan EMI Calculator will show you how much to repay the bank each month.
How does Car Loan EMI Calculators work?
You can calculate the Car Loan EMI Amount with the help of the mathematical formula: EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1] , where P, R, and N are the variables. This also means that the EMI value will change, each time you change any of the three variables. Let’s discuss these three variables in detail.
- ‘P’ stands for the Principal Amount. It is the original loan amount given to you by the bank on which the interest will be calculated.
- ‘R’ stands for the Rate of Interest set by the bank.
- N is the number of years given for the repayment of the loan. As you must pay the EMIs each month, the duration is calculated in the number of months.
So, if you take a car loan of Rs 10 lakh at an interest rate of 12%, the approximate EMI will be: P = Rs 10,00,000, R = 12/100/12 (You must convert into months), N = 2 years or 24 months. EMI = [10,00,000 x 12/100/12 x (1+12/100/12)^24] / [(1+12/100/12)^24-1] EMI = Rs 47,073.
Benefits of using the ClearTax Car Loan EMI Calculator
The ClearTax Car Loan EMI Calculator is a hassle-free generic tool, where you enter the loan amount, number of months and the interest rate. You get a clear idea on the car loan EMIs you would be paying the lender. This will help you to get your finances in order, before applying for the car loan. The Car Loan EMI Calculator shows you the Car Loan EMIs in seconds, eliminating the need for complex manual calculations. One of the main benefits of a Car Loan EMI Calculator is that it helps you to choose the loan tenure for the repayments. Selecting a shorter duration allows you to repay the car loan more quickly. However, the Car Loan EMIs will be on the higher side. You will be able to save money on the interest repayments. If you choose a longer tenure, the car loan EMIs will be on the lower side. However, you will incur a higher amount on the interest repayments.
Factors Affecting Car Loan EMI
Several factors affect the car loan EMI calculation. As the EMI depends broadly on the principal amount, tenure, and rate of interest, any change in these variables can result in a change in the EMI amount. The other factors are:
- Category (Salaried, Self- Employed Professional or a Businessman)
- Income slabs
- Age group
- Tenure of loan
- New or used cars
- Car loan scheme
- Car loan applicant
- An account with the bank
The loan eligibility will also depend on the value of the car selected by you.
FAQs on Car Loan EMI Calculator
How does the term (duration) affect my interest amount?
It is essential to realise that your interest rate is not the only factor that determines the total amount of interest you pay on your car loan. Your car loan tenure plays a significant role in determining the interest amount you repay the lender. As a general rule, for the same interest rate, the longer your duration, the higher are the interest repayments.
What are the current interest rates for car loans?
Banks are offering car loans with annual interest rates ranging from 8.5% to 12%. During festive seasons, some banks agree to waive off processing fees or even relax their current rates. Your credit history also plays a major role while you negotiate on the interest rates. If you have a higher credit score, you may bargain for a lower interest rate.
Which one is better, Car Loan EMI Calculator or Excel Calculator?
The Car Loan EMI calculator is tailor-made to calculate the Car Loan EMIs in seconds. It’s easier to use the Car Loan EMI Calculator as compared to the Excel Calculator.
Can the Car Loan EMI calculated by the bank be different from that calculated by the EMI Calculator?
It will be the same, provided you enter the same values. Please note that even a minor change will result in a difference in the final value. If the bank modifies some of the parameters, you will find the figures to be different from the EMI Calculator.
Will the Car Loan EMI Calculator help me understand how much EMI is payable after I repay a certain amount of principal as a chunk during the loan tenure?
Yes. Feed in the details of the outstanding balance principal and the tenure (provided by the bank on such prepayment). The EMI calculator will help you calculate your EMI for the outstanding balance period.
Is the car loan calculator the same as home, personal loan calculator?
These calculators are the same at the primary level. However, the Car Loan EMI Calculator shows you the specific information on the car loan.