One of many loans people can obtain from a bank or a financial institution is a car loan. In today’s fast-paced world, owning a car or an automobile has become a necessity. Be it a new car or a used one, people are looking forward to buy vehicles more than ever before.
Your budget is crucial in choosing the car you can buy, the down payment you can make, and the loan amount you need. The car loan can be repaid in a pre-arranged duration with manageable EMIs. Your credit score will suffer if you don’t pay back the loan on time, and the lender may seize the vehicle to make up for the loss.
What does an EMI calculator for Vehicle loans do?
The vehicle loan EMI calculator is a powerful tool that will guide you in calculating the equated monthly payments you need to make to the bank during the term of the car loan. Before entering the bank, you are notified of the loan’s required amount, interest rate, and monthly payments for the car loan. This tool is a formula box with sliders for the loan amount, loan tenure, and interest rate. The vehicle loan EMI calculator will display the monthly repayment amount to the bank after you enter the data.
How does the Vehicle Loan EMI calculator operate?
With the aid of the following mathematical formula, you can establish the car loan EMI amount: EMI amount is calculated as [P x R x (1+R)N]/[(1+R)N-1] with P, R, and N acting as the variables. Additionally, this implies that the EMI value will alter each time one of the three variables is altered. Let’s go into greater detail about these three variables.
“P” is an abbreviation for the principal amount. The initial loan amount that you received from the bank is what will be used to compute interest.
“R” speaks for the interest rate that the bank has established.
“N” is the total number of years allotted for loan payback. The period is measured in terms of the number of months because you must pay the EMIs every month.
If you borrow Rs 10 lakh for a car at a 12% interest rate, the EMI will roughly be as follows: P = Rs 10 lakh, R = 12/100/12 (you must convert to months), N = 2 years or 24 months. EMI = [10,00,000 x 12/100/12 x (1+12/100/12)^24] / [(1+12/100/12)^24-1] EMI = Rs 47,073.
Benefits of taking a Vehicle loan:
There are many positives to leasing funds to buy a car, some of which are mentioned below:
- Can be repaid in simple EMIs – You can choose your own simple equivalent monthly installments (EMIs) for your auto loan repayment. These EMIs will depend on the repayment period you select as well as the interest rate the lender will charge. Your stress of having to make a large loan repayment payment all at once is lessened by using EMIs. Instead, you might make modest payments as you can afford to do so.
- No need to present collateral – When you apply for a car loan, the vehicle itself will serve as your only form of security. The vehicle will be held in the trust of the bank, and the lender will have the right to confiscate it in the event of any payment default.
- Excellent for establishing your credit history – If you borrow money for a car and pay it back on time, your credit rating will rise. Because lenders will know you can pay them back, they will be more likely to offer you favourable terms, such as lower interest rates or the elimination of processing fees.
- Better planning – By paying back your car vehicle loan through EMIs, you may better manage your finances because you will know how much you will be spending each month to cover the debt. Then you can make the necessary adjustments to your other costs. You can use the car loan interest rate calculator feature to determine the EMI amount.
- Offers additional advantages – These days, many banks will give you perks like free maintenance, free road tax, etc. when you take out a car loan.
Factors Affecting Car Loan EMI
The vehicle loan EMI calculator is determined by a variety of parameters. Since the principle sum, term, and interest rate all play a significant role in determining the EMI, any change in any of these factors may affect the EMI amount. The additional elements that influence EMI are:
- Employment Category (Salaried, Self- Employed Professional, or Businessman)
- Income brackets
- Age demographic
- Duration of the loan
- Vehicle (New or Used)
- Car financing programme
- The applicant for the car loan
- An active bank account
The price of the vehicle you choose will also determine whether you qualify for a car loan or not.
Nowadays, more and more Indians are choosing to buy a vehicle. As a result, banks in India are providing vehicle loans with affordable rates of interest. Gone are the days when you had to wait in long queues at banks to apply for a car loan. Today, applying for a car loan is simpler than ever and can be done from the luxury of your home, with just a few taps. To know more about car loans, check out the Piramal Finance website, and find out which one suits you best.