Car Loan EMI Calculator
Calculate your monthly EMI, total interest payable, and total payment for your car loan.
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Understanding Car Loan Calculations
Understanding how car loans work can help you make better financial decisions when purchasing a vehicle. Let's break down the key aspects of car loans and how to calculate what you can afford.
The Car Loan Calculator: How It Works
Our Car Loan EMI Calculator helps you understand three important figures:
- Your monthly EMI (Equated Monthly Installment)
- The total interest you'll pay over the loan period
- Your total payment (principal + interest)
You can adjust three key factors that affect your car loan:
- Loan Amount: The amount you're borrowing to purchase the car
- Interest Rate: The annual percentage rate charged by the lender
- Loan Tenure: The number of years you'll take to repay the loan
Car Loan vs. Car Price: Understanding the Difference
It's important to understand that the car loan amount is typically less than the total price of the car. This is because:
Down Payment Requirement
Most lenders require a down payment of 10-20% of the car's value.
Example: For a car priced at ₹10,00,000, you might need to pay ₹1,00,000 to ₹2,00,000 as down payment, and the loan amount would be ₹8,00,000 to ₹9,00,000.
How Banks Determine Your Car Loan Eligibility
When you apply for a car loan, banks consider several factors:
1. Income-Based Assessment
Banks typically offer car loans based on your income level and repayment capacity.
Rule of thumb: Your car loan EMI should not exceed 15-20% of your monthly income.
2. Credit Score Impact
A higher credit score can help you secure better interest rates.
Good credit (750+): May qualify for interest rates 1-2% lower than average
Average credit (650-750): Standard interest rates apply
Poor credit (below 650): Higher interest rates or possible loan rejection
Car Loan EMI Calculation: A Practical Example
Let's say Rahul wants to buy a car worth ₹10,00,000:
- Down Payment: 20% of ₹10,00,000 = ₹2,00,000
- Loan Amount: ₹10,00,000 - ₹2,00,000 = ₹8,00,000
- Interest Rate: 9.5% per annum
- Loan Tenure: 5 years (60 months)
- Monthly EMI: ₹16,748 per month
- Total Interest Paid: ₹2,04,880 over 5 years
- Total Amount Paid: ₹8,00,000 + ₹2,04,880 = ₹10,04,880
Car Loan Affordability: The 20/4/10 Rule
Financial experts often recommend the 20/4/10 rule for car purchases:
- 20% Down Payment: Put at least 20% of the car's price as down payment
- 4-Year Loan Term: Keep your loan tenure to 4 years or less
- 10% of Income: Your total car expenses (EMI, insurance, fuel, maintenance) should not exceed 10% of your monthly income
Smart Car Loan Tips
- Compare Offers: Shop around for the best interest rates from different lenders
- Consider Total Cost: Look beyond the EMI to understand the total interest paid
- Prepayment Options: Check if your loan allows partial or full prepayment without penalties
- Loan-to-Value Ratio: A lower LTV ratio (higher down payment) can get you better interest rates
- Additional Costs: Factor in insurance, registration, and maintenance costs when budgeting for your car
How to Calculate Car Loan EMI
The Equated Monthly Installment (EMI) for a car loan is calculated using the same formula as other loans:
EMI = [P × R × (1+R)^N]/[(1+R)^N-1]
Where:
- P = Principal loan amount
- R = Monthly interest rate (Annual rate ÷ 12 ÷ 100)
- N = Total number of monthly installments (Loan tenure in years × 12)
Example Calculation
For a car loan of ₹8,00,000 at 9.5% interest for 5 years:
- P = 8,00,000
- R = 9.5 ÷ 12 ÷ 100 = 0.00792
- N = 5 × 12 = 60 months
- EMI = ₹16,748 per month
Car Loan Considerations
- Down payment typically 10-20% of car value
- Interest rates usually higher than home loans
- Shorter loan tenure (typically 3-7 years)
- Processing fees and other charges may apply
About Car Loans
A car loan is a secured loan specifically designed to help individuals purchase a vehicle. The vehicle itself serves as collateral for the loan, which means the lender can repossess it if you default on payments.
Car Loan Features
- Financing up to 90% of vehicle cost
- Fixed or floating interest rates
- Flexible repayment options
- Quick loan approval process
- Option for pre-approved loans
How to Use This Calculator
- Enter your desired car loan amount
- Set the interest rate offered by your lender
- Choose your preferred loan tenure
- View your monthly EMI and total interest payable