How to Estimate Your Monthly Payments with Car Loan EMI Calculator?

A four-wheeler has become a crucial addition to lives as the need for personal mobility has grown immensely in recent years.It’s nearly a necessity considering the rising work pressure, long office hours, and unreliable public transport. Buying a car for regular commuting makes sense. However, you don't need to save money for years and exhaust them all on a car purchase. You can borrow a car loan instead to buy your desired vehicle and repay the amount in fractions.

Acar loan EMI calculator is a handy tool that calculates the monthly installment amount for various loan terms. You can find an EMI plan suitable to your monthly budget and choose a repayment tenure accordingly.

In the following sections, we will discuss more about an EMI calculator that helps estimate car loan EMIs.

What are Car Loan EMIs?

A Car loan EMI is a monthly installment you must pay to the lender if you borrow a car loan. Each EMI consists of the principal and interest portion, which the lender distributes in equated monthly installments throughout the repayment tenure. Since you must pay one EMI each month, choosing an affordable EMI plan is essential using an EMI calculator.

Factors Affecting Loan EMIs

Several factors affect your car loan EMIs and are as follows:

• Category among salaried, self-employed, or businessmen
• Monthly income or annual turnover
• Age group
• Car loan scheme
• Existing relationship with the loan provider
• Eligibility and documents
• Creditscore
• Car’s value
• Down payment

What is a Car Loan EMI Calculator?

The car loan EMI calculator is an online utility tool that automatically calculates the equated monthly installments payable to a loan provider. When you know the EMI amount you need to adjust into your monthly budget, you can plan your finances accordinglyand choose a suitable repayment tenure. Since lending institutions like ICICI Bank offer flexible repayment terms on car loans, you can choose a scheme with budget-friendly EMIs. A longer tenure reduces the EMI amount, while a shorter tenure increases it. However, the interest cost increases with the term's length.

How Does an EMI Calculator Work?

A car loan EMI calculator works on the three most important loan-related variables:car loan interest rate, loan amount, and repayment tenure. The tool uses the following mathematical formula to calculate the EMIs:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Here:

• P = Principal Amount
• R = Rate of Interest
• N = Number of Months in the Tenure

Steps to Use a Car Loan EMI Calculator

Follow this stepwise procedure to calculate your EMIs using a car loan EMI calculator:

• Open the online EMI calculator.
• Enter the loan amount you wish to borrow.
• The interest rate offered by the lender.
• Loan tenure you want to select.

As you finalise these three variables, you will see the monthly EMI amount, principal amount, total loan cost, and the interest payable on your screen. You may change the variables to notice the changes in the figures. For instance, if you borrow a car loan of ₹10 Lakh at a 12 per cent car loan interest rate, the calculator will calculate your approximate EMI as follows:

P = Rs. 10,00,000

R = 12%

N = 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 per month

If you pay more each month, you can reduce the repayment tenure to increase the EMI amount and get debt-free sooner. However, if this amount is too big to manage each month, opt for a longer tenure to reduce the EMI amount.

Reasons to Use an EMI Calculator Before Borrowing

Below, you will discover the main reasons to use a car loan EMI calculator:

• Time-Saving:Using an EMI calculator helps save a lot of time and effort by rapidly calculating the EMIs based on the loan amount, interest rate, and repayment tenure. Quick and accurate results let you experiment with various loan amounts andterms.
• Precise Results:Manually calculating the EMIs is always prone to mistakes. With inaccurate results, you may make a wrong decision that disrupts your budget and makes repayment challenging. When you use a car loan EMI calculator, there is almost no chance of error unless you enter the wrong variables. With precise results, you can decide how much you can spend each month to buy your dream car on loan.
• Allows Adjustments:The calculator lets you try out different loan terms to see which monthly payment fits your financial situation best. You can experiment with various scenarios until you find the perfect match.
• Prepayment Planning:You can also use the calculator to see how extra payments or pre-payments will affect your loan. This helps you understand how you can reduce interest costs and pay off your loan more smoothly.
• Financial Planning:It helps you budget effectively by giving you a clear idea of your monthly car loan payments. This allows for better financial management and planning.

Tips to Choose the Best Repayment Tenure

Since the repayment tenure you select largely affects your EMIs and finances, here are a few tips for choosing an ideal loan term:

• Assess Your Financial Situation:Examine your financial situation closely and evaluate your monthly income, expenses, and potential changes. Then, decide upon an amount you can conveniently allocate towards loan EMIs.
• Understand the Difference Between Short and Long Term Repayment:A longer tenure reduces the EMI amount while a shorter term increases it. However, the interest cost also increases with the term length. So, you must choose the shortest possible tenure with budget-friendly EMIs.
• Consider Your EMI Affordability:Your EMI affordability is crucial to determining your repayment tenure. Use an EMI calculator to choose a tenure with EMIs you can comfortably manage without stressing your finances.

Choosing an ideal repayment tenure is essential after thoughtful consideration of your financial goals, preferences, and situation. A car loan EMI calculator is an excellent online tool that calculates EMIs based on your loan amount, interest rate, and repayment tenure. It helps with finalising budget-friendly EMIs for secure financial planning.

An informed decision using an EMI calculator ensures your car loan journey seamlessly aligns with your financial capacity.

Disclaimer:This article is sponsored content curated by HT Syndication. The inputs and details accounted for in the article do not necessarily reflect those of HT, and HT does not endorse or assume any responsibility for the information provided.