How can you reduce your car loan EMI?

4 MinsJan 16, 2023

How can you reduce your car loan EMI?

Buying a new car is a major milestone in our lives. It simplifies commuting and provides transportation comfort. People either save to buy their dream car or opt for a car loan.

A car loan is a more convenient way of buying a car. It provides you with quick funds without putting a dent in your savings. The loan can be repaid through Equated Monthly Instalments (EMIs) without hurting your finances.

Loan EMIs are a recurring expense and borrowers look to lower EMIs to save money. There are different ways of reducing car loan EMIs. Here's a look at some of them -

  • Long EMI tenure
    The EMI is inversely proportional to the loan tenure. The longer the tenure, the lower the EMI. So, one way to get a lower EMI is to opt for a longer tenure. For instance, a loan of ₹1 lakh for 5 years at an interest rate of 8% will require an EMI of ₹ 2,028. On the other hand, if the tenure is increased by 2 years, the EMI decreases to ₹ 1,559
  • Higher downpayment
    The downpayment is the amount that is paid upfront at the time of purchasing the car. If the down payment is high, the loan amount would reduce. As the loan amount is low, the EMIs will also be low.

  • [Also ReadNew or Pre-owned Car Loan? Which one should you choose?]

  • Choose the right lender
    Different lenders have different car loan interest rates. Higher interest rates result in higher EMIs. So, borrowers should look for lenders that have competitive interest rates for lower EMIs.
    Axis Bank is one such lender that offers car loans at competitive interest rates and enjoy reduced EMIs with up to 100% on-road funding.
  • Good credit history
    The interest rate greatly influences the EMI. The higher the interest rate, the higher would be the EMI. A good credit score is necessary to get a competitive interest rate. A credit score of 750 and above can fetch you interest rate discounts that help in lowering the car loan EMI.
  • Loan balance transfer
    You can also transfer the balance of a car loan from one bank to another offering lower interest rates and higher flexibility. This is primarily done to decrease the monthly EMI. If another bank is offering reduced interest rates on its car loan, you can opt for a car loan transfer to the other bank and get lower interest rates for lower EMIs

In today's world, having a car has become a basic necessity. More and more households are investing in a car and resorting to a car loan to fund the vehicle. While car loans are quite easy to avail of, their EMIs can add to your monthly expenses. Lower EMIs can help you maintain your budget and pay off the loan easily. You can find out more using Axis Bank’s car loan EMI calculator.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.