Buying a new car must be started with planning and deciding up a realistic budget. About 95% of the people buy cars on monthly EMIs and to understand the EMI, there are EMI calculators, which gives your planning the final shape and you become firm if you can afford the car segment you have been planning for or not.
An EMI (Equated Monthly Installment) calculator is one of the easiest tools designed to help you know your monthly payment and manage your budget without any surprise ad-ons.
How Does a Car Loan EMI Calculator Work?
A car loan EMI calculator is used to determine the monthly repayment schedule and amount for your car loan. Calculator can be used by simply inputting the loan amount, interest rate, and loan tenure. These primary parameters are essential for accurately calculating your EMI.
After you enter the required information, the calculator will use a predefined formula to calculate the EMI instantly. This removes any chances of human error caused due to manual calculations. Some of the modern designed calculators may also show an amortisation schedule, which is the outstanding balance after each EMI payment and the total interest you pay over the loan tenure.
Also Read: Best Second-Hand Cars in Jammu Under 5 Lakhs: A Complete Buying Guide
Here’s How To Use A EMI Car Loan Calculator
Step 1: Input the Loan Amount
Enter the total car amount, which is the final cost of the car. This is usually the car’s on-road price minus your down payment.
Tip: If you’re unsure about the exact loan amount, it’s suggested to input a slightly higher figure to account for insurance, registration, and other file charges.
Step 2: Enter the Interest Rate
Enter the annual interest rate offered by your lender or bank. Interest rates mostly vary and depend on your credit score, income, and loan tenure.
Tip: Compare rates from different banks, even a small difference in interest rate could affect the whole amount in large.
Step 3: Select the Loan Tenure
Select the loan duration, which usually is offered between 12 to 84 months for car loans. A longer tenure reduces the EMI but increases the total interest paid over time.
Tip: Balance the EMI to suit your monthly budget and avoid any unnecessary strain on your finances.
Step 4: Analyze the EMI Breakdown
After you have entered the loan amount, interest rate, and tenure, the calculator will instantly show:
- Monthly EMI
- Total Interest Payable
- Total Payment (Principal + Interest)
Tip: Understand this breakdown to know if the loan fits your finances or not. You can try different tenures or down payment amounts until the EMI aligns with your finances.
Step 5: Plan for Prepayment or Foreclosure
Some calculators also allow you to understand early repayments or foreclosure scenarios which helps in understanding how much you can save on interest if you pay off your loan early.
Tip: If you can make early payments, then you must, as partial prepayments reduce your overall interest burden.
Understand the EMI Formula:
- The standard EMI formula is: EMI = [P x R x (1 + R)^N] / [(1 + R)^N – 1].
- Where:
- P = Principal loan amount.
- R = Monthly interest rate (annual interest rate divided by 12).
- N = Loan tenure in months
Also Read: The Benefits of Buying Second Hand Cars in Jammu
Check an example:
- Loan Amount (( P )): Rs. 5 lakh
- Annual Interest Rate: 10%
- Loan Tenure: 3 years (36 months)
First, convert the annual interest rate to a monthly rate. Then, calculate the EMI using the formula:
E = 500,000 * 0.008333 *(1 + 0.008333)^{36}/{(1 + 0.008333)^{36} – 1}
After making calculations as above, the EMI would come out approximately at Rs. 16,134 per month for the given loan parameters. Make sure that you understand the EMI formula and calculation process, as it helps to correctly calculate and know how the car loan EMI calculator works to provide you with accurate results.
Bonus Tips
- Always factor in extras such as processing fees and other hidden charges, as EMI calculators usually don’t include these.
- Change the calculations if your loan offer changes or you renegotiate interest rates.
- Use the results to understand and compare loan offers from different banks.
Conclusion
A car loan EMI calculator considers the guesswork out of planning and helps you understand the scenario before you make the big purchase, so that you stay in control of your finances. Whether you’re buying a hatchback or a luxury SUV, these calculators help in ensuring that you always decide which car to buy which suits your budget.
