Car Loan EMI Calculator

With an advancing modern era and busy lifestyle, while some people are bound to purchase cars for their travel convenience, others buy them just to fulfil their dreams or as an important asset. Today, buying a dream car is almost within one’s reach irrespective of whether someone is salaried or self-employed. One doesn’t need to be wealthy enough or save a fair amount of money to buy their first car, unlike a couple of decades ago. One can simply avail of a new car loan and drive in the dream car sooner.

Different banks offer different car loan calculators. In order to calculate the EMI, basic details such as the repayment tenure, principal amount, and the rate of interest must be entered to fetch the result.

How to calculate car loan EMI?

The basic formula for calculating any loan remains the same which is as under:

E = P x R x (1+R)^n / {(1+R)^n – 1}

where
‘E’ stands for EMI i.e. Equated Monthly Installment.
‘P’ stands for the Principal amount
‘R’ stands for the interest rate applicable to the car loan.
‘n’ stands for the tenure of the car loan (in years)

We can make use of a car loan EMI calculator to estimate the amount we have to pay each month towards our car loan. The online EMI Calculator offered by Bank Bazaar will calculate the monthly installments as well as provide a detailed loan repayment table presenting details such as the principal amount interest amount being paid and the outstanding balance after payment of the installment.

Let’s take an example of the loan amount of Rs 5Lakhs, EMI of Rs 10,624, tenure of 5 years, interest rate, interest rate of 10% p.a. and processing fee of 1%.

Year	Principal	Interest	Balance
2021	Rs.81,135	Rs.46,348	Rs.4,18,866
2022	Rs.89,630	Rs.37,852	Rs.3,29,236
2023	Rs.99,017	Rs.28,468	Rs.2,30,221
2024	Rs.1,09,384	Rs.18,099	Rs.1,20,837
2025	Rs.1,20,839	Rs.6,646	0

Types of EMI Offered in Car Loans

Car loans are offered at two types of interest rates: Fixed interest rate and Floating interest rate. The fixed rate remains unchanged for the entire tenure of the loan while the floating rate is subject to change from time to time. Let’s take a clearer view of these two types of interest rates offered in car loans.

1. Fixed Rate EMI Calculation

Under the fixed rate EMI calculation, the EMI paid towards the car loan remains unchanged throughout the loan tenure. This is so because the company has offered a fixed rate of interest for the whole period.

For example, for a car loan equal to Rs.5 lakh at 10% p.a. interest for a 3-year tenure, the interest payable will be Rs.16,134 per month which will be the amount payable throughout the tenure of the loan.

2. Floating Rate EMI Calculation

Under the floating rate EMI calculation method, the EMI payable differs based on the interest rate applicable at that time. The floating rate of interest changes based on the market lending rate.

For example, if someone has taken a car loan equal to Rs 5 Lakhs for a 3-year tenure at the interest rate of 10% per year then the EMI payable will be above Rs 16,134. After the completion of one year, the desired person has an outstanding balance of Rs 3,36, 409. The car loan interest rate changes to 8% after one year. So, for the rest of the tenure, the EMI payable becomes Rs 15,215.