Owning a car gives you a unique social status. Other than the prestige factor, it is a convenient means of transport for you and your family.
You don't need to be wealthy or scrimp and save to buy a car anymore. Car loans are available where you can repay the amount in easy monthly instalments called Equated Monthly Instalments (EMIs).
Cars became cheaper in India in early 2020, with the Union Government reducing Goods and Services Tax (GST) from 28% to 18%, which made buying a car an even more attractive proposition.
Most banks have tie-ups with car dealers for setting up loans for customers who approach the dealers to buy cars. Once the customer has chosen a model, the bank representative will set up a car loan for the customer.
The customer makes a down payment against the cost of the vehicle, and the bank lends the remaining amount. The rate of interest is fixed (typically 7% or 8%) but the customer can decide on the term (no of years) of the loan.
It is possible to secure a pre-approved loan from a bank. Within the framework of the terms and conditions, you can choose the term (typically up to a maximum of seven years) and pay monthly EMIs.
Banks offer car loans not only to individuals but to companies, trusts and societies. The rules will vary between individuals and organisations, but the rates of interest and other variables remain more or less the same.
Whether you want to purchase a car as an individual or you will represent an organisation, you can make use of an indispensable online tool called a car loan EMI calculator.
By using this online tool, you can get an idea of how much you might have to pay for a particular loan amount on the value of a car.
Then, you can vary the term to see the maximum and minimum EMI that you would be charged.
If you are contemplating buying a car, you can get a good idea of your financial outlay, even before you start shopping for the vehicle. It sets your expectations, and you can tackle the project more realistically.
Before your loan application goes through, the lender refers to a Car Loan Repayment table. It contains all the information about a set of details like the principal, interest, monthly EMI, and how much would be left outstanding each month.
The car loan EMI calculator considers all the above variables to provide details of the final monthly EMI you will have to pay. It will show you how the EMI changes as you change the term or the amount of down payment.
Using this online calculator is relatively easy, as long as you pay attention to the information you are inputting.
Bear in mind that the amounts can be considerable, typically in lakhs, so you should enter the information carefully.
The two single most important numbers are the term and the loan amount. A higher loan amount will increase the EMI. The shorter the term, the higher the EMI and vice-versa. You can vary the numbers to reach a convenient figure.
Be aware that because the source of these calculators is different banks, the interest rates may vary. Hence, your results may vary slightly from one calculator to another for the same set of variables.
You may ask why you need an online EMI calculator if the lender is anyway going to do all the calculations.
First off, there is tons of competition between car loan providers. You can get the best deal by trying out the calculators of different lenders. No lender will tell you that they are more expensive than others.
The most crucial benefit that you get from a car loan EMI calculator is that it helps you set your expectations about car finance before you even start the process.
There can be a considerable disparity between lenders concerning the interest rates. You can’t change the interest rate of a particular provider, but you can select the provider with the lowest rates.
The most obvious user of this tool is the bank providing the loan. The car salesman may also use it in an attempt to motivate you to close a deal with an attractive EMI that falls within your budget.
But you as the buyer can also make fair use of a car loan EMI calculator.
When you plan to buy a car through finance, you can gain the upper hand over the bank representative, who will offer you the best deal, realising that you are not ignorant.
You can make fair use of this online calculator by scouring the market for a car of your choice, and then comparing the respective EMIs of each model and brand. These calculators also provide options for pre-owned vehicles.
EMI = [P x R x (1+R) ^n] / [(1+R) ^ n-1]
Here, P = Principal, R= % interest, and n = number of instalments.
If P= ₹700,000.00, R= 11% per annum= 11/12= 0.19667 per month, N = 84 months,
then, EMI = ((700000*0.19667 /100*(1+0.19667 /100) ^84/ ((1+0.19667 /100) ^84-1))) = ₹11,986.00
To sum up, the car loan EMI calculator has multiple advantages as follows:
If you wish to buy a car on loan today, first of all, try out online EMI calculators of different loan providers.
Keep these calculators accessible to you, and you will be surprised at how helpful they can be in giving you the information you need for your purchase.