Personal Loan

What Are the Steps to Calculating a Car Loan? 


The cost of borrowing money to buy a car is referred to as auto loan interest or Car Loan interest. The lender will base its interest rate on your credit score, debt-to-income ratio, and other factors.

  • To create your budget, you should know your interest rate and how much money goes toward your monthly loan balance.
  •  Car Loan EMI includes the principal and interest payments on your car loan. The amount, rate of interest, and period primarily determine the EMI. The longer the period, the lower the EMI, but you will pay more interest to your lender.  

What Do Auto Loan Calculation Formulas Include?

The key factors in the calculator for a car loan are the interest rate, loan size, and loan term.

  • A larger loan will result in a higher monthly payment. A smaller loan will result in lower payments.
  • Higher interest rates result in higher monthly payments than lower interest rates.
  • A loan with a shorter term will have a higher monthly payment than a loan with a longer term.
  • When looking for the right loan for your monthly budget, you can adjust these three factors to find the best balance for your needs.

Car Loan EMI Calculation Methods  

You can calculate the EMIs on your car loan in two ways: online or manually.  

Method 1: Using an Online EMI Calculator for Car Loans 

Visit the lending institution’s car loan EMI calculator page. 

The monthly EMI you must pay will be displayed instantly after entering the information mentioned above.

Method number 2: Use a manual EMI Calculator for Car Loans

This is the formula for a calculator for a car loan: 

E = [(1 + R) N – 1] [(P x R x (1+ R) N)] where E denotes Equated Monthly Instalment, P is the principal loan amount, R is the interest rate, and N the number of months

These three variables are changeable. This means that the EMI value will change whenever one of the three variables is changed.

The following are the five advantages of using an EMI calculator for a car loan :

  • Simple to use
  • Quick results
  • It saves time and energy that would have been spent on manual calculations.
  • It assists you in determining how much your car loan EMI will be.

Advantages of a Car Loan

Flexibility in choosing a tenure

Car loans are available for terms of up to seven years. This gives you the freedom to plan your finances and the convenience of choosing the tenure of your choice. 

Secured Loan 

Because a car loan is a secured loan, you are not required to mortgage your existing assets (secured against the car itself). Meaning until the loan is fully repaid, the lending institution or bank has a lien on the asset, giving it the authority to seize the asset and recover the debt by selling the vehicle.

Loan Payment Options

You can pay with post-dated checks or by auto-debit. Your EMI will be deducted automatically from your bank account. This will be when you use the auto-debit feature. 


A car loan is a type of credit product offered by banks and other lenders. It allows you to finance the purchase of a car with a low down payment. The loan can be repaid in EMIs over time at an agreed-upon interest rate. Before applying for a loan, the car loan EMI must be calculated.

A car loan calculator can assist you in calculating the EMI and interest payable on a financed vehicle. India is now the world’s fourth-largest market for four-wheelers. The figure demonstrates how car demand has risen over time. Many people desire a personal car, but the cost impedes purchase.

A car loan can help you pay a low down payment and easily get your dream car. The remaining balance can be paid monthly at an agreed-upon interest rate. 

Dive into Piramal Finance articles for more such finance-related subjects here:


  1. What If I Can’t Pay My Car Loan EMI?
    • When taking out a loan, make sure you can repay it. Failure to do so will result in substantial fines from the lender. Your credit score will also suffer as a result. Suppose you are unable to repay the loan due to unforeseeable circumstances. In that case, you must notify the lender as soon as possible so options such as moratoria or a longer repayment period can be considered.
  1. What Is The Required Down Payment On A Car?
    • Generally, the minimum down payment for a car loan is 10% of the car’s on-road price. This is because most lenders offer 90%, if not 100%, of the vehicle’s on-road price. However, if you make a substantial down payment, you will require a lower loan amount. Your monthly EMIs and interest rate will also be low.
  1. What factors influence your car loan EMI?
    • Loan amount
    • Interest rate
    • Loan tenure
    • Rest period once a month
  1. What exactly is EMI?
    • The Equated Monthly Instalment (or EMI) is made up of the loan principal and interest. As a result, the EMI equals the principal amount plus the interest paid on the car loan. The EMI is usually fixed for the entire loan term and is repaid.