Why you should use a Car Loan EMI Calculator before you buy your Car?
Car loan can be used to purchase a car; new or used. It can be a small car, a sedan or a sports utility vehicle or a multi utility vehicle. It is also called as auto loan. Before you take a car loan, it is important to check how much EMI you will be paying. There are various Car Loan EMI calculators available online. You can use the car loan EMI calculator to determine your monthly instalment that is to be paid to the car loan provider. Car loan EMI calculator will give you a brief idea of how much money you will be paying and based on your monthly requirement, you can choose a tenure that suits you.
Make sure that you will have enough money at your disposal after paying your monthly loan instalment. If you end up paying more assuming that if you cover most of the payment, the loan will clear out fast, but if are left with less disposable income for the rest of the month, you might end up borrowing further to meet you daily requirements. Hence take a loan for a tenure that will enable you to conveniently pay off the loan without having to compromise on the standard of your living too much.
You will have to fill in the details of the loan in your Car Loan EMI Calculator. The loan information includes loan amount, interest rate, tenure and the processing fee. A lot of bank charge a processing fee of 0-3% of the loan amount at the time of disbursing the loan amount.
Most of the car loan EMI calculators will give you a break-up of the monthly payment that is applied towards interest and how much lowers your loan principal. At the earlier stage, a large portion of the EMI goes towards paying the interest. As the loan is maturing, the larger portions go towards paying the loan principal. The ending balance of any given period denotes the principal amount that is owed to the bank at any point. You also get an annual view of the starting balance, interest paid and principal paid and the ending balance information.
The Car Loan EMI Calculator also provides the break-up of the time taken to pay off the loan. The large portion is diverted to paying the interest initially. Hence it is divided into four quarters, the first quarter is the longest. The portion increases as the loan tenure or the interest rate is increased.
This will give you a detailed information about how much money is going towards paying the interest and the principal loan amount and in which pattern it is being paid. The most important thing to consider while taking a car loan is to check how much monthly instalment you will be paying to the provider. Different banks will offer you different interest rate depending on their rules and regulations. But, always compare the monthly outflow for the same amount and for the same tenure and then choose the plan that best suits your needs and make sure it is within your capacity to pay off the loan. Keep in mind the interest is paid in the reducing balance method. The interest is calculated on the outstanding principal balance. Different banks use different methods, like daily reducing balance, monthly reducing balance and yearly or quarterly reducing balance method.
Remember that the earlier the principal reduction is done, the lower amount you will be paying to the bank. The Car Loan EMI Calculator amortization table that gives you the monthly view of the starting balance, interest paid, principal paid and the ending balance will give you a clear picture of how the banks are collecting the interest and how much of the principal is paid in the different quarters. Based on this information you can choose a provider who will reduce your principal balance sooner.