Lending institutions offer auto loans to salaried and self-employed individuals and business companies after either a down payment or full financing for on-road pricing, in equal monthly installments (EMI). charges a fixed or variable interest rate on
The EMI of an auto loan also depends on factors such as the lending institution, loan amount, repayment term, borrower’s creditworthiness, and the car model and brand selected by the applicant.
For example, if you are applying for a new car loan of INR 10 lakh and the bank is charging 10.5% interest for periods up to 10 years, the simple interest formula will be used to calculate the interest. Add up to calculate your monthly EMI.
Here are the steps:
E = PXRX (1+R)N/(1+R)N–1)
where E = EMI; P = principal amount; R = interest rate; N = tenure in months.
EMI = INR 10,00,000 X 0.00875 X (1 + 0.00875)120 / (1 + 0.00875)120 – 1) = INR 13,493.
This aspect of calculating variable interest rates helps you calculate EMI before choosing a car loan. Nonetheless, banks typically provide a breakdown of EMI for the outstanding amount of sanctions notices on auto loans.