# Car Loan EMI Calculator

Created by Tibor Pál, PhD candidate and Purnima Singh, PhD
Reviewed by Steven Wooding
Last updated: Nov 08, 2022

Are you tired of waiting in bus/train lines? Buying a car can help you avoid such situations, giving you the freedom to reach your destination comfortably. But it also means worrying about affordability or saving for years!

Not anymore. Use our car loan installment calculator to know your EMI (equated monthly installment) in advance and plan your budget accordingly. If you are considering leasing a car instead of buying, our car lease calculator can help.

• What is a car loan?
• How to calculate EMI on your car loan?
• What is the prevailing car loan interest rate?
• How to apply for a car loan?

You may also be interested in checking the bike loan EMI calculator if you're looking to buy a 2-wheeler instead of a car. If you are about to suspend your EMI payment, check our moratorium calculator, where you can check the effect of a moratorium on your repayment. Or you may check our lumpsum calculator if you are more interested in investment.

## What is a car loan?

A car loan or auto loan is a sum of money that you borrow from a bank or other lending institution to buy a car. So, instead of paying the whole amount up front to the seller, you pay fixed monthly installments to the lending institution that makes full payment to the dealer on your behalf.

It is a secured loan, which means you mortgage your car as collateral until you repay the loan amount and interest.

## How to calculate car loan EMI?

To calculate the EMI on your car loan, we will use the formula:

$\small EMI = P \times R \times \left ( \frac{(1+R)^N}{(1+R)^N - 1} \right )$

where:

• $P$ — Loan amount given to you by the bank;

• $R$ — Rate of interest set by the bank (calculated every month); and

• $N$ — Loan tenure/duration in months.

For example, suppose you want to buy a Tata Nexon car for an on-road price of about Rs. 8 lakh. If the bank is ready to finance 100% of the on-road price at an annual interest rate of 8.0% for a tenure of 60 months, you can calculate the EMI as following:

1. Calculate the monthly interest rate:
$\quad \quad \scriptsize R = \frac{8}{(12 \times 100)} = 0.00666$
1. Now calculate your EMI on Rs. 8 lakh car loan:
$\quad \quad \scriptsize \begin{split} EMI =\ & \text{Rs.}\ 8,00,000 \times 0.00666 \times \\ & \left ( \frac{(1+0.00666)^{60}}{(1+0.00666)^{60} - 1} \right )\\ =\ & \rm Rs. \ 16,218 \end{split}$
1. Over the entire loan duration, i.e., 60 months, you will make a total payment of:
$\quad \quad \scriptsize 60 \times 16,218 = \text{Rs.}\ 9,73,200$

## How to use the car loan EMI calculator?

Now let us see how you can calculate the EMI on Rs. 8 lakh car loan using the car loan EMI calculator:

Car loan inputs

1. Enter the loan amount (Rs. 8,00,000) and loan tenure (60 months).

2. Type in the annual interest rate set by the lending institution (8.0%).

3. Input the processing fee charged by the bank (Rs. 1500).

Payment summary

1. The car loan EMI calculator will give you an estimate of your monthly installments (₹ 16,221), total interest payable (₹ 1,73,267), and total payment (₹ 9,74,767) made during the entire loan duration.

2. It will also show the annual percentage rate (APR) (8.08%). While calculating APR, the processing fee charged by the bank is also taken into account. Hence, you can use it to compare the car loan options offered by different banks.

3. You will also find a detailed account of your periodic principal and interest payments, as well as the outstanding amount at any point in time by using the amortization schedule and a chart of balances.

## Car loan interest rates

The interest rates for car loans vary from one lending institution to another. In general, the interest rates start from about 7.0% and can go up to about 15.0%. You can also choose between floating and fixed rates of interest.

Most lending institutions also charge a one-time processing fee varying between 0.2% to 0.5% of the loan amount. Therefore, it is always advisable to compare the APR for various banks before applying for a car loan.

## How to get a car loan? - Applying for a car loan

To apply for a car loan, you need to approach a bank or lending institution with the following documents:

• Filled application form with photograph;
• Identity and residence proofs;
• A copy of the invoice for the car;
• Bank account statement for the last six months; and
• Latest salary slip and income tax returns for the last two years.

You may need to furnish more documents if you are self-employed.

The bank will assess your loan repayment capability based on your CIBIL score and the documents mentioned above. Once the loan is sanctioned, the loan amount is disbursed to the car dealer from whom you are buying the car.

## Things to consider before applying for a car loan

Before applying for a car loan, you should shop around to get the best interest rates on your car loan. We also recommend using our car loan installment calculator to decide if you can afford to pay the installments.

In addition, you should also consider the following points:

• Part-payment or foreclosure charges: Most banks allow you to make part-payment or full payment of the loan amount before the complete tenure. However, there may be a foreclosure charge. Therefore, you should always check the prepayment clause before applying for a loan.

• Processing fee and other non-refundable charges: In addition to the interest rates, you should also check the processing fee and any additional non-refundable charges as these will increase the cost of your loan.

• Loan disbursal period: Make sure you check how long it will take for the bank to disburse the loan amount to the dealer once the loan is sanctioned.

## Car loan EMI calculator disclaimer

You should consider the present car loan EMI calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are not exhaustive despite our best effort.

We have created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive helpful feedback and advice.

## FAQ

### How can I reduce my car loan EMI?

To reduce your car loan EMI, you can adopt one or a combination of the following ways:

• Longer tenure: If you opt for a longer loan tenure, your monthly installments will reduce.

• Larger down payment: Try to make a larger down payment on your car. This will reduce the loan amount and subsequently your EMI.

• Prepayment: Whenever possible, try to prepay your loan, as this will help in reducing the principal amount.

• Balance transfer: You can also transfer your loan from one bank to another and negotiate competitive rates.

### How much down payment should I put down on a car?

It is usually advisable to make a 20% down payment. Most banks finance only 80-90% of the on-road price of the car.

### Can I pay more than the EMI for a car loan?

Yes, you can pay more than the EMI for a car loan. This additional payment will go towards reducing your principal amount and hence will lower your EMI.

### Can I pay my car loan early?

Yes, you can pay your car loan early. However, you should check with your lender for any loan foreclosure penalty before doing so.

### What is the minimum CIBIL score for car loan?

For most banks, the minimum CIBIL score for car loan approval is 750.

Tibor Pál, PhD candidate and Purnima Singh, PhD
Car loan inputs
Loan amount
Tenure
mos
Interest rate
%
Processing fee percentage
%
Processing fee
Payment summary
Display...
chart of balances
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 Equated Monthly Installment (EMI) ₹ 16,221 Annual Percentage Rate (APR) 8.08% Loan term 5 years Loan principal ₹ 8,00,000 Total interest payable ₹ 1,73,267 Loan fees ₹ 1,500 Total payments ₹ 9,74,767