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    Why Is It Important to Calculate Car Loan EMI Beforehand?

    While applying for a loan, the repayment of the debt is the most integral part of all the aspects that are considered by banks and non-banking financing companies (NBFCs) before the funds are disbursed. Opting for a loan that exceeds the repayment capacity of an individual can not only increase the chances of the loan application getting rejected, but also introduces the possibility of defaulting during the repayment of the debt. Therefore, it is crucial for customers to check their EMIs beforehand and choose a plan that suits their requirement, circumstances, and repayment capability.

    Calculate your Car Loan EMI

    Definition of EMI

    EMI is the abbreviation for Equated Monthly Installments. When a borrower applies for a loan, he or she has to repay the loan along with an predetermined interest in small amounts distributed throughout the tenure of the repayment. This equal amounts of money that is paid at regular interval towards the loan is known as EMI.

    Factors that Impact Car Loan EMI

    While taking a car loan, the amount of payable EMI is computed using a number of factors. Therefore, it can vary from customer to customer. In order to calculate EMI, the banks and NBFCs take the following variables into account:

    • Loan amount This is the money borrowed by a customer from a bank or NBFC to finance the purchase of a car. The more amount a person borrows, the larger sum he or she has to pay as EMI. An individual might be eligible for a larger amount of loan but actually borrows a lower sum depending on his or her requirement. In this case, the EMI will be calculated based on the money borrowed by the candidate, and not the amount that was originally sanctioned.
    • Rate of interest This is the amount charged as interest by the lender while offering a loan. EMIs are directly proportional to the interest rate charged by a bank or NBFC. Therefore, the higher the interest rate, the more you will have to pay as monthly installlments. Since the rate of interest is compounded annually based on the outstanding debt, the amount payable as interest gradually reduces at the end of the term of a loan.
    • Repayment tenure This is the duration in which the borrower has to pay the debt through equal monthly installments. Since increasing the term of a loan generally causes the EMI to decrease, it can be said that loan repayment tenure is inversely proportional to the loan EMI. However, extending the tenure might result in a larger interest rate.
    • Down payment Down payment is the lump sum money that the customer pays upfront while purchasing a car. Since part of the price of the selected car is paid by the customer, the loan amount also comes down. Therefore, the amount of payable EMI is also reduced.

    Formula for Car Loan EMI Calculation

    The formula to calculate the EMI of your car loan is mentioned below:

    E = P x R x (1 + R)^n / ((1 + R)^n – 1)

    Here,

    E is the amount of EMI payable

    P is the principal amount of loan

    R is the rate of interest

    n is the number of installments in which the loan will be repaid

    EMI Calculation Using Excel Spreadsheet

    You can calculate your monthly car loan repayment amount using an Excel spreadsheet. In order to compute your monthly installments with the help of Excel, you will have to do use the predefined function PMT. The syntax for this function is:

    PMT (rate, nper, pv)

    Here,

    pv is the current or principal loan amount

    rate is the fixed interest rate of the loan

    nper is the number of installments in which the loan will be repaid

    Online Car Loan EMI Calculator

    Calculating the EMI of your car loan manually using the above-mentioned formula is a tiresome and challenging task along with being prone to human errors. Therefore, you can use a car loan EMI calculator available online instead, and find out how much money you will have to pay each month. All you will need to do is provide the details of your loan such as the loan amount, repayment tenure, and fixed rate of interest. The EMI calculator will give you the correct output without any hassle. While checking your EMI using an online calculator, you will also have the benefit of adjusting the EMI by changing the parameters. Once you have chosen a plan that suits your requirement and circumstances, you can apply for the loan online or offline through a lender of your choice.

    Additionally, the EMI computed using an online car loan emi calculator is subject to change due a number of reasons. When a customer opts for a floating rate of interest, the EMI can increase or decrease depending on the fact whether the interest rate increases or decreases. Prepayment of loan and increase in loan tenure are also some of the reasons that can cause the monthly installment amounts to change. Read further to learn why you should calculate your EMI using a calculator before applying for a car loan.

    Benefits of Calculating EMI Before Applying for a Car Loan

    As part of the loan approval process, banks and NBFCs cross-check the credit history of all borrowers in order to make sure that the candidate does not default with the payment. When you are applying for a loan in order to purchase a car, it becomes your responsibility to repay the entire debt within the predetermined duration. If the debt is not paid back on time, it will impact your credit profile negatively. This, in turn, might affect your loan applications in case you choose to apply for another loan in the future. Mentioned below are the reasons why it is important to use an EMI calculator before applying for a loan:

    • Manage your finances better When you use an EMI calculator, you will get to know how much money you will have to pay each month beforehand. This will not only help you manage your finances better, but will also assist you repay your loan on time.
    • Decrease your chances of defaulting Learning about monthly installments prior to loan application helps customers apply for a loan amount within their repayment capacity. Additionally, candidates can also opt to extend their loan tenure so as to increase their eligible loan amount or reduce the payable EMI. This can reduce their chances of defaulting significantly.
    • Compare the rates of different lenders By using an EMI calculator along with an amortization table, borrowers can evaluate which loan scheme better suits their requirement while offering more advantageous terms such as higher quantum of loan, less interest rates, less repayment tenure etc. Checking the plans by different lenders online can also help them learn about any ongoing offers.
    • Decide the loan amount and tenure When a customer uses an online calculator for EMI, he or she has the facility of adjusting the loan amount, tenure, and interest rate as many times as he/she wishes to and find out a plan that suits his/her needs and repayment capability.
    • Reduce the chances of loan rejection Since you can adjust the variables in an EMI calculator for a car loan and choose the best plan for yourself that matches your repayment capacity and requirements, the chances of your loan getting rejected also get notably reduced.
    • Maintain a better credit profile When you have the ability to choose a scheme that is more suitable to you in terms of repayment, the chances of you defaulting reduces. Therefore, there is less possibility of it turning into a bad credit and helps the individual maintain his or her credit score.

    Conclusion

    While there are a number of reasons that can impact the EMI of a car loan, calculating the payable monthly installment of a debt can help customers choose a plan that suits their needs and repayment capacity. This, in turn, helps individuals not only opt for the best scheme available in the market according to their requirement, but also decreases their chances of defaulting while maintaining a good credit history. Furthermore, pre-planning the repayment of a loan can also assist the customers in managing their finances better.

    Customer Reviews

    • Bank of Baroda Car Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      The experience with them has been quite good with this loan where the loan amount has been sufficient. The interest rate which they offered has been nominal when compared with the market rate and there has not been any extra charges which they had made so far. Their customer support team had also been supportive as well.
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Jan 18, 2019
    • HDFC Bank Car Loan
      "Good Experience"
      0.5 5.0/5 "Blown Away!"
      Before three years I purchased second vehicle that is Hyundai I 10 , the documentation process was good with HDFC. The dealer coordinated with the bank, hence the process was quick. I got multiple options but I chosen HDFC, the Interest rate is better because I am an existing customer.
      Was this review helpful? 0
      , delhi
      Reviewed on Jan 18, 2019
    • HDFC Bank Car Loan
      "Good Experience"
      0.5 5.0/5 "Blown Away!"
      I was taken car loan from HDFC, first time I purchased SANTRO car, the documentation was very convenient. They gave me the door step service I went to the dealer and they done the process, and on time I got the car deliver. They gave me the flexible emi option.
      Was this review helpful? 0
      , delhi
      Reviewed on Jan 18, 2019
    • SBI Car Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been quite a good experience i had with this car loan and the loan amount which they had provided has been sufficient as well. The interest rate with them was around 9.25% which was nominal when compared with the market rate. The charges which they had made has been nominal as well, and even their customer support has been responsive as well.
      Was this review helpful? 1
      , bhubaneshwar
      Reviewed on Jan 17, 2019
    • SBI Car Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been taken my car loan with State bank of India, they have given me sufficient loan amount, and i am satisfied with the loan amount , and the rate of interest they have charged me up to 9.45% which is bit high compare to other bank,i have asked for 9 % but its okay, and the processing fee they have charged me was nominal,overall service is good.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 17, 2019
    • Kotak Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been taken my car loan with Kotak mahindra bank recently ,like 2 months before i took this loan, and i am happy with the loan amount they have given me ,it was sufficient for me, and the rate of interest they have charged me up to 9.3% which was nominal for me and the processing fee they have charged me was nominal, the loan amount process went smoothly. the overall service rendered by them was really good.
      Was this review helpful? 1
      , chennai
      Reviewed on Jan 17, 2019
    • Central Bank of India Car Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It was a good experience i had with this loan and the loan amount which they had provided has been sufficient. The interest rate with them is quite nominal when compared with the market rate. There has not been any sort of additional charges which they had made so far.
      Was this review helpful? 1
      , bangalore
      Reviewed on Jan 13, 2019
    • SBI Car Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I took my car loan in State Bank of India by last year. The charges are normal. I have spend down payment nearly 1L out of 7L. The branch is near to my residence so will never contact the customer service. The process was immediate and it was completed within 2 days.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Jan 12, 2019
    • HDFC Bank Car Loan
      "Its Excellent"
      0.5 4.5/5 "Excellent!"
      HDFC gave me the door step service for the car loan. I took the loan before three years. It was the fantastic experience for me because I got the better interest, I took the loan for 5 years but I done the foreclose in three years , there was no charges for it.
      Was this review helpful? 2
      , ahmedabad
      Reviewed on Jan 11, 2019
    • Capital First Car Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The process in getting my Car loan from them has been quite good and the process went smooth. The loan amount was sufficient but the interest rate with them has been quite high when compared with the market rate. Their customer support and their response has been good and has been helpful as well.
      Was this review helpful? 2
      , bangalore
      Reviewed on Jan 10, 2019
    • HDFC Bank Car Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      My car loan experience with HDFC has been good and the loan amount which they had provided has been sufficient. The interest rate with them has been nominal and there has been some charges like processing fee. Overall their has been a help from their customer support as well.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 09, 2019
    • HDFC Bank Car Loan
      "Average Loan Service"
      0.5 3.0/5 "Satisfactory"
      I have approached the bank directly for my car loan. Since I'm existing customer of HDFC for 13 years, i have chosen them. I purchased the loan amount of Rs. 2 lakhs. They have offered me a interest rate of 16% In October 2018, i have closed this loan. Total tenure period of the loan was 3 years. Car Dealer has recommended me about this loan.
      Was this review helpful? 4
      , srikakulam
      Reviewed on Jan 09, 2019
    • Magma Car Loan
      "Average service"
      0.5 1.5/5 "Bad"
      I have been using my car loan with Magma Fincorp previously, they have given me sufficient loan amount ,the rate of interest they have charged me was high,and the processing fee they have charged me was high , i was not happy with there service.
      Was this review helpful? 3
      , ghaziabad
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using my car loan with HDFC bank, there service is too good, the loan amount they have given me was sufficient,the rate of interest they have given me up to 9% which is nominal for me,and the processing fee they have charged me was nominal only they have charged me up to 1% only,and still my loan is running ,there was no hidden charges they have charged apart from that,overall service is good.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Nice offer and nice loan"
      0.5 4.0/5 "Great!"
      I had a car loan with HDFC 1 year back. They have given me a nice offer hence i opted the loan with HDFC. I'm not sure about the partial payment and pre-closure facility. They have given me a nice interest rate according to what i want. I was taken a loan amount of Rs. 3 lakhs.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 08, 2019
    • review Car Loan
      "Need to reduce the charges"
      0.5 3.5/5 "Pretty good"
      I have taken a car loan in Nissan Institution, it was good. I bought the car from same showroom and they have provided me a facility. The rate of interest was high. The documentation procedure was simple. I have taken the loan almost 2 years back and its still running. The loan tenure is 5 years.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Looking for less interest rate"
      0.5 4.0/5 "Great!"
      My car loan experience was good with HDFC bank, loan amount was sufficient and the rate of interest was high when compared to other banks. Customer service was good and they responded on time. The tenure period for this car loan is for 5 years.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jan 08, 2019
    • ICICI Bank Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with ICICI bank, the rate of interest they have charged me was nominal and they have charged me processing fee they have charged me which was nominal, the loan amount they have given me was sufficient according to the car price i got my loan, still this loan is running,overall service is good.
      Was this review helpful? 3
      , new delhi
      Reviewed on Jan 08, 2019
    • IOB Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with Indian overseas bank, the loan amount they have given me was sufficient, they have charged nominal rate of interest they have charged me up to 9 % which was nominal and there is zero processing fee , so far there service is have experience was good, they have not taken any hidden charges ,there overall service is good.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 08, 2019
    • HDFC Bank Car Loan
      "Good loan experience with HDFC"
      0.5 4.0/5 "Great!"
      My car loan running with HDFC bank, the customer service is super and the fast approval on the disbursement. They taken 15 days to deliver the car. The principal amount is Rs. 4 lakhs for the tenure of 5 years, the car model is baleno which is latest.
      Was this review helpful? 1
      , aligarh
      Reviewed on Jan 07, 2019
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