Comprehensive understanding of car loan EMI calculator
For many of us, a car loan is usually one of the first loans we take. Banks have been making it increasingly easy to get a car loan these days. As the same suggests, this loan is sanctioned for the sole purpose of purchasing a car. The loan amounts and tenures are also for relatively smaller amounts as compared to home or business loans. Borrowers can now calculate their car loan EMI with the help of an EMI calculator. Let’s understand the functioning and components of an EMI calculator.
What is an EMI calculator for car loans?
An EMI calculator is an online tool available on the internet and the lending institution’s website. This online tool allows you to calculate the principal loan amount along with the interest rate and the tenure of the loan and helps you figure out if the EMI fits your budget. The borrower can use various permutations and combinations of loan amounts, interest rates and tenures until he arrives at the EMI he is comfortable paying, with the help of the car loan EMI calculator.
Using the EMI calculator for car loans
Get Parag Mishra’s stories in your inbox
Join Medium for free to get updates from this writer.
An EMI calculator typically has three parameters which can accurately tell you just how much EMI you must pay on the car loan. All you have to do is enter the numbers, and the tool calculates your EMI in a matter of seconds. Learn how to calculate EMI for a car loan by following the below-mentioned steps.
Step 1 — Input the principal: The first field of the EMI calculator asks the borrower to input the principal loan amount he/she wishes to borrow. The borrower must consider the amount he can pay as down-payment and then input the loan amount. Most lenders offer 85%-90% finance on the car loan. You can pay a higher down-payment to reduce interest rates and EMIs. Let’s say you wish to borrow ₹500,000.
Step 2 — Input the tenure: The car loan EMI calculator prompts you to input the tenure for which you which to procure the loan. Most lenders offer car loans for a tenure of up to seven years, with a minimum tenure of 1 year. Now, let’s say you wish to repay the loan in 5 years.
Step 3 — Input the rate of interest: After deciding the loan amount and tenure, you must input the rate of interest in the EMI calculator. Usually, lenders charge a fixed interest rate on car loans, i.e. a flat, single interest rate for the loan tenure, irrespective of market fluctuations. A good bank typically offers interest rates from 8.60% onwards. Let’s say you get a car loan at 10% interest rate.
Step 4 –EMI amount is calculated: After considering the principal loan amount and down-payment, the tenure and rate of interest, the car loan EMI calculator will show you that you must pay a monthly EMI of ₹10,641.
