Owning a car these days has become more of a necessity than a luxury. Just a few decades ago, owning a car was considered to be an extravagant thing to do. However, in these modern times, the scenario has changed completely. In this day and age, owning a vehicle is not something that is only meant for the rich anymore; rather it is something that is earned by even those who belong to lower income groups. All thanks to the financial product of Car Loans from different lenders in the market.
Getting the right car loan is important when you want to buy a car. The interest rates are high and payments of the loans can add up over time. High-quality car loans are usually offered by banks and lenders that have been around with a bank rating of A+ or higher. Always make sure that you are getting the best deals on your car loan and do not be afraid to compare any loan offers with other sources in order to land yourself a great deal!
With so many banks and financial institutions offering car loans, it could get a little confusing to go about choosing the best offer. It can become time-consuming as well to wade through offers to find out which one will suit you. But one thing that can help you at a higher scale is the interest rates that you’re about to pay, the lower the better.
Importance of Car Loan Interest Rates
When you are buying a car, you need to understand the importance of the interest rate that is applied to your loan amount. . It is one of the most important factors that can make a loan expensive or cheap. While checking out different banks and bank schemes, this number is an important factor that should be considered. It is not like all of them have an interest rate equal to 15% or 20%, some even provide loans at 12% or less. People should choose their car loans based on the term of repayment and not just because of the low-interest rate alone. They should make sure that the total amount payable is within their budget and can be repaid without putting any burden on them.
Why You Need to Calculate your Car Loan
If you are looking forward to buying a new car, then it is important for you to compute the amount of money you need to meet up with your financial obligations. Understanding how your car loan interest is calculated can be beneficial in many ways- especially if you’re trying to minimize your expenses. Therefore calculating your loan interest beforehand can come in handy. How interest rates work and how they are calculated matters a lot. Interest rates are very important because it is the prime factor that determines your total loan amount and how much back you will have to pay to the bank at the end of your loan tenure.
How to Calculate Car Loan
If you are planning to purchase a new car, calculate its EMI to know what amount you need to pay each month to get your dream car. Banks and third-party websites offer an online calculator to do the job for you. The online EMI calculator offered by different banks and financial institutions is based on a few basic details such as the involved parties like the borrower, co-borrower, and co-applicant if any, loan amount, rate of interest, and loan tenure.
The effective monthly interest rate, or EMI, on any type of loan, is calculated using a formula. It looks like this:
E = P x R x (1+R)^n / {(1+R)^n – 1}
where ‘E’ stands for the EMI you owe,
‘P’ stands for the principal amount,
‘R’ stands for the interest rate applicable to your car loan,
and ‘n’ stands for the tenure of the car loan (in months).
FAQs
An EMI is an amount that you need to pay monthly for a fixed period of time. It is similar to rent, in which you pay a fixed amount each month for a fixed period of time. Home loans and Car loans are paid through EMI. EMI payments are made by the borrower, and the lender receives these EMIs from the bank.
There are many benefits to using a Car Loan EMI Calculator. It provides a Break-Up of the Due Amount, allowing you to plan your budget. The details that are being provided on the calculator are accurate, and the results it displays are reliable. Using the calculator saves you time because there is no limit to the number of times it can be used; therefore, you can compare different EMIs for different values.
There are two major types of interest rates – Fixed Interest Rates and Floating Interest Rates.
Yes, there are no usage charges on any EMI/Interest Rates Calculators, so you can easily use them as many times as you want.