About Car Loan EMI
A car loan EMI (Equated Monthly Installment) is a fixed amount you pay every month to repay your car loan. The EMI includes both the principal amount and the interest charged by the lender.
How Car Loan EMI is Calculated?
The EMI is calculated using the formula:
EMI = [P × r × (1 + r)^n] / [(1 + r)^n - 1]
Where:
P = Principal loan amount
r = Monthly interest rate (Annual rate / 12 / 100)
n = Loan tenure in months
Factors Affecting Car Loan EMI
- Loan Amount: Higher loan amount increases your EMI
- Interest Rate: Banks offer rates between 7-12% based on your credit score
- Loan Tenure: Longer tenure reduces EMI but increases total interest
- Down Payment: Higher down payment reduces the loan amount and EMI
- Credit Score: Better score (750+) gets you lower interest rates
Tips for Getting the Best Car Loan
- Compare interest rates from multiple banks and NBFCs
- Maintain a good credit score (750 or above)
- Pay a higher down payment to reduce the loan amount
- Choose a shorter tenure if you can afford higher EMIs
- Check for processing fees and prepayment charges
- Consider pre-owned car loans if budget is a constraint