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    Car Loan Amortisation

    Banks, Non-Banking Financial Companies (NBFCs), and other lending institutions in India offer new and used car loans up to 85-100% of the on-road/ex-showroom price of the car at competitive interest rates. With the hike in prices of most makes and models of cars this month, more customers are seeking auto finance to afford a car of their choice.

    A car loan is a secured loan wherein the car acts as the collateral. Borrowers repay car loans to the banks in Equated Monthly Installments (EMIs) over a specified period of time (loan tenure). Banks offer new and used car loans for a loan tenure ranging from 1 to 7 years. Visit a third-party website to compare various car loan offers and choose one with the lowest interest rate and flexible repayment options. Keep in mind, making a higher down payment can lower the cost of your car loan.

    What is Car Loan Amortisation?

    The periodic repayment schedule of your car loan is represented in the form of an amortisation table called the car loan amortisation. The table consists of EMI payments, principal loan amount, car loan interest rate, interest payments, the outstanding dues after each EMI payment, loan tenure, down payment, etc. With the amortisation table, you can find out when the loan will be paid off and how much your car loan will cost you each month.

    Why is it important to use Car Loan EMI Calculator?

    Calculating your car loan EMI can help you find out how much your car loan will cost you monthly. Car loan EMI is calculated based on the below formula:

    E = P x r x (1+r)^n/((1+r)^n – 1), where E is the Equated Monthly Installment, P is the principal loan amount, r is the rate of interest, and n is the loan tenure.

    The manual calculation of car loan EMI can be prone to human errors. It is also time-consuming. Therefore, it is advisable to use the free online car loan EMI calculator that is available on the bank website or a reliable third-party website. The tool is easy and simple to use. All you have to do is enter the loan amount, loan tenure, interest rate and processing fee into the tool. Click on the ‘Calculate’ button. You will get instant and accurate results of your car loan EMI calculation in the form an amortisation table.

    The online car loan EMI calculator can save you time and effort when there is a change in your interest rate or you decide to opt for loan prepayment, then you can get a revised loan repayment schedule. You can input varying combinations of car loan interest rates, loan tenures, and principal loan amount into the tool and get revised amortisation schedules. In the case of loan prepayment, depending on the EMI calculation results, you can either keep the EMI payments the same and increase the loan tenure or increase the EMI payments and keep the loan tenure the same.

    A short loan tenure means higher EMI payment but lower interest payments whereas a long loan tenure means lower EMI payments and higher interest payments. Choose a suitable loan tenure so as to save up on your overall interest payments. In order to choose a suitable car loan tenure, use the online car loan EMI calculator to compare the effect of different loan tenures on your interest payments.

    Car Loan Amortisation Table

    The car loan amortisation table represents the periodic repayment schedule of your car loan. The table consists of the monthly EMIs, interest payments, and the outstanding dues after each EMI payment has been made. Here is an example for better understanding of the car loan amortisation table:

    Car Loan Amount - Rs.15 lakh

    Car Loan Tenure - 6 years

    Car Loan Interest Rate - 13%

    Processing Fee - 2%

    Based in the EMI formula, E = P x r x (1+r)^n/((1+r)^n – 1), the overall breakup of the total amount payable is as follows:

    Monthly Car Loan EMI - Rs.30,111

    Total Interest Due - Rs.6,68,003

    Processing Fee - Rs.30,000

    Total Amount Payable - Rs.21,98,003

    The below amortisation table represents your repayment schedule for a loan amount of Rs.15 lakh at 13% interest rate in regular instalments over a loan tenure of 6 years (2018 to 2023):

    Year Principal Paid Interest Paid Total Payment (Principal + Interest) Outstanding Loan Balance
    2018 Rs.1,76,611 Rs.1,84,723 Rs.3,61,334 Rs.13,23,389
    2019 Rs.2,00,989 Rs.1,60,345 Rs.3,61,334 Rs.11,22,399
    2020 Rs.2,28,733 Rs.1,32,601 Rs.3,61,334 Rs.8,93,667
    2021 Rs.2,60,306 Rs.1,01,029 Rs.3,61,335 Rs.6,33,262
    2022 Rs.2,96,236 Rs.65,098 Rs.3,61,334 Rs.3,37,126
    2023 Rs.3,37,126 Rs.24,209 Rs.3,61,335 Rs.0

    What are the benefits of a car loan amortisation table?

    The advantage of an amortisation table is that you can find out how much your car loan will cost you monthly and when your loan will be paid off. Depending on the amortisation table which represents your car loan repayment schedule, you can create a monthly budget to maintain a low debt-to-income ratio. When you have a high debt-to-income ratio, there are higher chances of defaulting on the loan. Defaulted car loans reflect badly on your credit report. It acts as a red flag for lenders. Thus, hampering your loan prospects. Therefore, create a budget in order to ensure you make timely EMI payments. Making regular loan EMI payments is a method of improving your credit score. A good credit score will improve your chances of loan approval.

    In the case of a floating rate of interest, the change in interest rates over the loan tenure can result in higher or lower interest payments. You can use the online EMI calculator to get revised amortisation schedules for varying combinations of interest rates and loan tenures. Depending on the results, you can choose a suitable loan tenure to curb your overall interest payments. The same applies to car loan prepayment. Banks allow borrowers to prepay a part of the whole of the car loan after 12 successful EMI payments. You can use the EMI calculator to add the prepayment fee and prepayment amount to the EMI calculation in order to get a revised amortisation schedule. It is wise to make part prepayments and reduce the loan tenure, rather than fully pre-closing the car loan because it can have a negative effect on your credit score.

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