These
days buying a car has become more of a necessity than luxury. It is advised
that you should not burn all your savings at once if you are planning to buy a
car, there is an alternate option for this- car loan. It allows a potential
buyer to pay for the vehicle in monthly instalments with interest (EMI) and the
bank will pay off for the car in full. Wondering how many EMIs you will be
paying over the loan time period and how you can manage your finances
accordingly, EMI calculator will help you in doing so.
Car Loan EMI
Equated
monthly instalment is the amount you pay every month to the bank until the
borrower pays off the full loan amount. It includes the interest and a part of
the principle amount. The tenure is divided by the sum of principle amount and interest
and it gives the total amount which has to be paid every month. The interest
would be larger in the initial months and will gradually shrink with each
payment.
Three
major facts about EMI:
- Longer tenure will reduce your monthly instalments
- If the rate of interest is high, then your EMI would be higher
- EMI depends on your loan amount, high loan amount will give you high EMIs
Car Loan EMI Calculator
Car loan EMI calculator plays a major role when
you are planning to take a car loan, from deciding the perfect car model to
assisting you in planning your monthly finances. It is very easy and hassle
free tool that helps you in maintaining your present and prospective monthly
instalments. Many third party loan comparison websites, leading banks and
financial institutions offer this tool on their official websites and an
applicant can use it for free.
You can just enter the details which includes your rate of interest, loan amount and repayment tenure, EMI calculator will instantly calculate your monthly instalments as well as amortization schedule. If you enter a processing fee (if any) then this fee will be added to your principal amount and will give you the sum of expense which you will be incurring. If you wish to prepay your loan, then you can also check the influence of your prepayment on EMI by entering the prepayment amount, prepayment frequency and prepayment penalty. To make your EMI affordable, it is advised that you use the EMI calculator and plan your monthly budget accordingly
How does EMI calculator works
EMI
Calculator first calculates the compound interest of your principal amount at
the current rate of interest. The calculation is based on the total payable
amount, compound interest and the remaining part of the EMI is considered to be
the principal amount.
EMIs
can be computed mathematically using this formula.
[P x R X (1 + R) ^ N] / [(1 + R) ^N - 1] = Monthly instalments
[P x R X (1 + R) ^ N] / [(1 + R) ^N - 1] = Monthly instalments
Where P = principal loan amount, R = Rate of interest per month and N = number of monthly instalments. Suppose your rate of interest is 12% per annum then the interest rate per month will come out to be
12/ (12 x 100).
The
EMI is a total of principal amount and the interest amount. For example, if the
borrower takes up a loan of Rs. 10 lakh on which the monthly interest is 0.0075
(according to the annual interest rate of 9%) and the tenure is 15 years tenure
that is 180 months
then by using the formula, the EMI will be calculated as Rs. 10, 142.67.
then by using the formula, the EMI will be calculated as Rs. 10, 142.67.
By
using an online car loan EMI calculator, you will
get results without any calculation errors or hassles that are prone to occur
otherwise.
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