If you’ve finally decided to take out a Car Loan to purchase your dream set of wheels, a Car Loan EMI calculator should help you get your gears into motion.
Have you finally zeroed in on your dream car? Do you spend sleepless nights imagining what it would be like zooming down the highway without a care in the world? Or at the very least, imagining what it would be like to drive around in an air-conditioned car of your own instead of gasping for air on your local bus.
In any case, if you’re looking to get yourself a new set of wheels by opting for a Car Loan, then you’ve come to the right place. If calculating your EMIs is proving to be a major bugbear, we’ve got it all worked out for you right here in the simplest manner possible.
We’re going to drive you through everything related to Car Loan EMIs, so you’ll never have to endure any pothole-sized obstacles when calculating your EMIs in the present as well as in the future.
Additional Reading: Car Loans – Interest Rates, Eligibility And More
What Are EMIs?
Before we get ahead of ourselves, let’s start with the basics. What exactly are EMIs? It’s quite simple, really! An EMI or Equated Monthly Instalment is the payment you make every month towards the repayment of your loan, regardless of whether it’s a Personal Loan, Home Loan, Car Loan, Two-Wheeler Loan or even an Education Loan.
Keep in mind that the longer the repayment tenure of your loan, the lower your EMIs will be, while the shorter the repayment tenure, the higher the EMIs. But, you also need to keep in mind that the longer your repayment tenure, the more interest you will have to pay. This is why it is advisable to go in for as short a loan repayment tenure as possible, as long as you can afford it.
Your EMIs are made up of two distinct components, namely the principal component and the interest component. During the early stages of loan repayment, the interest component makes up most of the EMI payments, while the principal component makes up most of the EMI payments towards the later stages of the loan.
If you are planning on prepaying your loan, it is definitely advisable to do so during the early stages of the loan repayment rather than towards the end.
Additional Reading: What Is EMI And How Is It Computed?
What Is An EMI Calculator?
An EMI calculator is a nifty tool that can help you determine how much your loan will cost you. In short, it saves you time and effort when it comes to crunching numbers and doing the math when deciding on which loan to go in for. If you find calculating your EMIs by yourself to be way too troublesome and complicated, making use of an EMI calculator can help you understand your loan better without all the unnecessary complications.
Since you’re opting for a Car Loan, a Car Loan EMI Calculator is exactly what you need to help you decide which loan best suits your needs and requirements.
How Does A Car Loan EMI Calculator Work?
It’s quite simple. All you need to do is enter the following data:
- The loan amount you’re looking to borrow
- The loan tenure
- The rate of interest
- The processing fee
Once you’ve entered this information, the EMI calculator will do the rest in a flash.
However, if you’re one of those people who loves to figure out what makes certain things tick, then here’s the formula the EMI calculator uses:
E = P x r x (1+r) ^n/ ((1+r) ^n – 1)
‘E’ is the amount that you will have to pay every month, or in other words, your EMI.
‘P’ is the loan amount that you want to borrow.
‘r’ is the rate of interest that is applicable, but calculated on a monthly basis instead of the annual rate of interest. It is obtained by using the formula ‘r’ = (annual interest/12) x 100.
‘n’ is the duration of the loan in terms of months. So, if you select a term of 5 years, ‘n’ will be 60.
While this is the basic formula that the EMI calculator uses, it may even take into consideration other data like the loan processing fee, if any. Usually, the processing fee is a percentage of the loan amount and can range from 1% to 3%. However, this fee is decided by the bank and will differ from one bank to another.
Additional Reading: 7 Things To Consider Before Applying For A Car Loan
What Are The Components Involved When Using A Car Loan EMI Calculator?
To better understand how the BankBazaar Car Loan EMI calculator works, let us delve into the different components that it uses to carry out the necessary calculations.
The amount of loan you are looking to borrow is the most important data component that you will be required to enter. All you need to do is drag the scale and place it on the loan amount you want to apply for.
Keep in mind that banks sanction loans based on various factors such as your earning capacity, repayment capability and more. So, you may not get the exact loan amount you’re looking for.
If you’ve decided on the loan amount that you’re looking to borrow, you will be required to enter the tenure of the loan. Usually, Car Loan repayment tenures tend to range from 12 months to 84 months, although this may differ from bank to bank.
You can decide on a loan tenure by modifying the values on the EMI calculator so that it takes your budgetary constraints and other financial commitments into consideration.
Interest Rate And Processing Fee
After you have entered the loan amount and the loan tenure, enter the rate of interest offered on the Car Loan by the bank you’ve chosen. While Car Loan interest rates usually vary from bank to bank, they tend to fall in between the 10% to 15% range.
Remember though that different factors affect your eligibility for different interest rates. Some of these include your salary, your location, the organisation you work for, etc.
The processing fee also differs from one bank to another, but most banks usually charge a processing fee that ranges from 1% to 3%.
An interesting feature of the Car Loan EMI Calculator is that it also gives you amortisation details, which helps you better understand the following:
- What the principal amount on your Car Loan is
- How much interest you’ve paid till date
- Details of any outstanding amount on an annual or half-yearly basis
Additional Reading: Repayment Options In Car Loans!
There you have it! If you’re looking for a smooth ride, then a Car Loan EMI Calculator will work wonders for you. Avoid all the complicated numerical bumps along the way and let this helpful, little tool do all the work for you.