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How To Use Car Loan Emi Calculator

By Author: Neha Sharma
Total Articles: 105

A car is a commodity that modern-day lifestyle demands. Not only does it make everyday travel hassle free but also considerably safer. However, it is not always possible for a middle-class family to accumulate a lump sum that will help them afford a car of their dream. This is where a car loan plays a significant role. Nowadays getting a car loan is not a huge challenge. Many institutions offer car loans through a simple and transparent process.

However, before availing a loan you should make sure that you are able to pay the Equated Monthly Instalments (EMIs) without excessive financial burden or risking your solvency. The best way to ensure this is by checking your EMI for a combination of principals and tenure on a car loan EMI calculator.

How to Use an EMI Calculator

• It is a tool available free online and at any bank. You have to provide information such as principal amount, tenure and rate of interest.
• The principal is the total money the banks lend you. The EMI increases with the increase in principal.
• Since you will pay the EMI every month, calculation of the tenure is done in months and not in years
• The rate of interest varies from bank to bank, depending on the type of loan
• On entering the data, the calculator will instantaneously show you your EMI. You can play around with the variables until you reach an EMI you know you will be comfortable paying.
• You also get an amortisation schedule or your schedule of payments over the tenure of your car loan with an EMI calculator
• The formula the calculator uses is [P x R x (1+R)^N]/[(1+R)^N-1]. Here P stands for principal, R stands for rate of interest and N stands for tenure.

Benefits of Using an EMI Calculator

The key benefits of using an EMI calculator for car loan are as follows-

• You can make an informed decision with respect to your existing financial condition
• You can determine the amount you are taking as a loan and evaluate how long will it take to pay back without burdening your family’s expenses
• You get an opportunity to rearrange your budget to accommodate the car loan EMI before taking the loan
• You can compare car loans of different banks and choose the one that offers the best rate to suit your needs
• The results are accurate and instantaneous. This saves you time and ensures there is no human error.
• It is a free tool that you can use innumerable as many times as you need

A car loan EMI calculator is a generic tool that is widely available and can help you prepare yourself financially before buying a new car. Not predicting how a loan financially affects you can have terrible long-term consequences for you.

It is crucial that you calculate your EMI on a calculator and compare the EMI of different institutions to make the most profitable decision. Otherwise, you may be in for unpleasant surprises, which you are not prepared for.

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