Personal Loan

Top 10 Tips to Reduce Your Car Loan EMI


Not everyone can afford to spend money on purchasing a car. If you do not want to wait for years to save money for buying a car, you can still fulfill your dream of having a car by taking out a car loan. But taking out a car loan requires you to pay a regular monthly loan installment. EMIs become an additional part of your monthly expenses. In this article, you can find the top 10 tips to reduce your car loan EMI.

Tips to reduce your car loan EMI

If the EMI of your car loan consumes a major part of your monthly income, you might have to sacrifice some of your expenses. To avoid this, you can follow a few simple tips given below. These tips will help you reduce your car loan EMI.

  1. Opt for a bigger down payment – Before buying a car, you should plan your purchase in such a way that you can pay a larger amount as a down payment. You cannot afford to pay the whole cost of the vehicle in one go, but you can try to accumulate a big portion for the down payment. A big down payment can reduce the principal amount of the loan. You can save money on interest by taking out a smaller loan. A smaller loan will have lower interest and monthly payments.
  2. Go for a loan with a long tenure – If you are not in a position to pay off higher EMIs but still want to finance a car, you should choose a loan with a longer tenure. If the repayment term of the loan is long, you will have to pay EMIs for a long period, but the amount of the EMIs will be less. Long-term loans have shorter monthly repayments as compared to short-term loans. You can use the vehicle loan EMI calculator to know the EMIs payable with different loan tenures.
  3. Use your surplus money to pay the outstanding loan amount – The major part of the initial EMIs of a loan is apportioned to the interest on the outstanding principal. If you want to lower your EMIs, try to pay off the outstanding principal amount whenever you have surplus money in your hands. It will assist you in lowering future monthly payments by saving interest on the outstanding loan amount. You can use the car loan interest rate calculator to see the effect of a decrease in the outstanding loan amount on your car loan EMIs.
  4. Take a loan from your existing bank – It is better to get your car financed from your existing bank in which you maintain your savings or current account. Your existing bank is aware of your creditworthiness and financial background. You can negotiate for a lower processing fee, and the bank can help you choose the most suitable financing scheme that allows you to pay reduced EMIs.
  5. Maintain a good credit score – Banks check your credit history before approving your loan. If you have a poor credit history, a bank can still approve your loan, but with high-interest rates. Therefore, you should plan your decision to buy a car at a time when you have a good credit score so that you can procure a loan at a low-interest rate. A loan with a lower interest rate can ensure you have small EMIs.
  6. Negotiate the final price of the car with dealers – Compare the prices and discounts offered by several car dealers before purchasing a car. You should opt to buy from a dealer who offers the maximum discount so that you have to get the lowest possible amount of loan from the lender. A lower purchase price results in a lesser loan amount, which will consequently result in lower EMIs. You can use the car loan interest rate calculator to calculate EMIs payable at different loan amounts.
  7. Choose a lender that offers loans at the lowest interest rate – You should get your car financed from a lender that offers you the best deal in terms of long tenure and low-interest rates. You should explore various finance schemes offered by banks and NBFCs and then choose the one that can provide you with the desired benefit of lower monthly payments.
  8. Select a car according to your repaying capacity – The decision to buy a car should be taken after considering your present and future financial needs. If you have other major expenses lined up, it’s better to buy a car that can fulfill your needs rather than an expensive, luxurious car. If you already own a car, you can exchange it for cash and increase the amount of the down payment for your new car to reduce the EMIs.
  9. NBFC loan options – Car dealers have tie-ups with non-banking financial institutions (NBFIs). You can get a beneficial financing scheme from these NBFCs. The car dealer has to sell the car, and the NBFC has to forward a loan, therefore, you can get a good offer from the car dealer’s NBFCs.
  10. Procure a loan with low processing fees – Processing fees and other administrative costs of a loan are negotiable. You can ask the bank to reduce or lower the processing fee. You can use your savings to increase your down payment and lower your loan amount, lowering your car loan EMIs.


Buying a car is everyone’s dream. Vehicle loans are the best option for buying a car. With the help of the above tips, you can reduce the burden of high EMIs. Plan your decision according to your level of income and expenses, and then choose a lender that can offer you the best deal.

Take calculated steps from time to time to lower the burden of the outstanding loan and reduce your vehicle loan EMI.

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