The Equated Monthly Instalment (or EMI) consists of the principal portion of the loan amount and the interest. Therefore, EMI = principal amount + interest paid on the Car Loan. The EMI, usually, remains fixed for
the entire tenure of your loan, and it is to be repaid over the tenure of the loan on a monthly basis.
Mathematically, EMI is calculated as under:
P x R x (1+R)^N / [(1+R)^N-1]
P = Principal amount of the loan
R = Rate of interest
N = Number of monthly instalments.
So, say you are applying for a Car Loan of Rs 6.50 lakh from Axis Bank at a rate of interest of 9.5% p.a. and your loan tenure is 8 year (or 96 months), your EMI will be calculated as under:
EMI = 650000* 0.007917 * (1+ 0.007917)^96 / ((1+ 0.007917)^96)-1 = Rs 9,692
The rate of interest (R) on your loan is calculated monthly i.e. (R= Annual rate of interest/12/100). For instance, if R = 9.5% per annum, then R= 9.5%/12/100 = 0.007917.
Does it look complicated? Don’t worry! Use Axis Bank’s Car Loan EMI calculator.
Axis Bank’s Car Loan EMI calculator is a great online tool that provides you with the answer in a split second and enables you to understand how much will be your EMI outgo. All you got to do is use the slider
to enter the loan amount, interest rate, and the tenure of your loan (in months).
Here are the five benefits of using the EMI calculator:
- Easy to access
- Provides quick results
- Saves time and energy spent on doing manual calculations
- Helps you ascertain how much will be your Car Loan EMI outgo
- Make loan planning easier for you
Remember, the interest rate and your loan tenure are the vital deciding factors for your loan EMI. Higher the interest rate on the loan, higher will be your EMI and vice-versa. Similarly, opting for a longer tenure
reduces your EMI and vice versa. So, consider opting for longer loan tenure when you avail a Car Loan so that repayments can become comfortable.
Do note that during the initial months of the Car Loan tenure, you pay more towards interest, and gradually, as you repay the loan, a higher portion is adjusted towards the principal component. This is because;
EMIs are computed on a reducing balance method, which works in your favour as a borrower.