Car EMI Calculator | Calculate Loan EMI, Down Payment, Interest Rates (2023)

EMIs or Equated Monthly Installments refer to the monthly payments you make to the lender to repay your loan. These payments include the principal amount as well as the interest i.e. EMI = Principal Amount + Interest on Principal amount. Mathematically, EMI can be calculated using the following formula:

{P x R x (1+R)^N / [(1+R)^N-1]}

where, P = Principal amount of the loan, R = Rate of interest and N = Number of monthly installments.

Most lenders offer car loans for tenures ranging from 1 year to 5 years. You can choose the loan tenure as per your preference. Some lenders like HDFC Bank, Axis Bank, ICICI Bank also offer car loans with tenure up to 7 years.

Generally, new car loan customers choose a 5-year tenure. For a longer tenure, EMIs will be lower but the borrower will end up paying more interest against the loan amount and for a shorter tenure, EMIs will be higher and the customer will end up paying lower interest against the loan amount. So, if the customer is getting a loan for 7 years and doesn’t want to commit to a higher EMI then he should choose a loan tenure for 7 years.

When you are paying off a part of the car loan by making larger payments than the EMI, before the end of the tenure, then it is called part prepayment. By part prepayment, your principal outstanding will be reduced and also reduce your future EMIs. Usually, banks accept part prepayment of upto 25% of the principal outstanding amount in a year, charges against the part prepayment depends upon the due month of the EMI.

For example: HDFC charges 5% on the part payment amount in case part prepayment is within 13-24 months from 1st EMI and 3% on the part payment amount in case part prepayment is post 24 months from 1st EMI.

Fixed Interest Rate:

Fixed Interest Rate allows the repayment in fixed equal monthly installments over the entire period of the loan. The interest rates in such a case are fixed and don’t change with market fluctuations. Thus the borrower knows the exact amount he needs to pay in the future or at least he knows the exact interest rate to pay for the outstanding loan at that time.

Floating Interest Rate:

Floating interest rate, which is also referred to as variable or adjustable interest rate is any debt instrument that does not have a fixed interest rate. The time period for a car loan plays an important role in deciding this fixed percentage. The borrower decides the time period and the lender charges the interest rate accordingly. This period generally ranges from 1 month-7 years.

After the car loan is approved, a customer will have to sign an agreement including a NACH (National Automated Clearing House) form, a centralised system implemented by National Payments Corporation of India (NPCI), launched with an aim to consolidate multiple ECS (Electronic Clearing Service) systems running across the country allowing paperless debit transactions between banks.

Getting into such an agreement would mean that the customer has granted permission for auto-debiting of the EMI amount from his bank account on a date as mentioned in the agreement till the last EMI of the loan amount.

A number of borrowers assume their job is done after paying off the last equated monthly installment (EMI) on their car loan. But, there are still some unfinished tasks left for the borrower. After completing the repayment of your car loan, there are five important things that you need to do as explained below:

a) If you made the last EMI on your car loan or did a prepayment to close the car loan, then get the final payment receipt from your bank.

b) Within 2-3 weeks’ time of repaying the car loan, you should receive all your documents from the bank via post at your registered address. The set of documents includes a No Dues Certificate (NDC) or No Objection Certificate (NOC) from the bank along with other documents submitted at the time of the car loan application.

c) Do collect the entire repayment statement of your car loan from the bank which you can receive after submitting an application in the bank. This will be useful while updating the credit history in case of any discrepancies in your credit score and report.

d) Hypothecation essentially means that the car for which you have taken a loan for is kept as collateral with the bank until you pay off the loan. The car is in the physical possession of the customer but the bank is the actual owner of the car until the customer pays off the entire loan amount. Once the loan amount is completely repaid, hypothecation removal is required to transfer the ownership of the car to the customer as there is no outstanding amount against the car.

Hypothecation removal process can be explained in the following 4 steps:-

Step 1: Receive Documents from the Lender/Bank

No Objection Certificate:

It is the agreement by bank, which states that the lender has no objection over removal of hypothecation

Form 35:

Two copies of Form 35 are usually given, and it mentions the termination of hypothecation between you and the bank.

Step 2: Documents to be taken to the RTO

You need to collect the following documents and then visit the RTO:

• Original Form 35, and copies of it signed by the registered owner and the bank, original Bank NOC, copy of your PAN Card, copy of valid car insurance, original RC (Registration Certificate), copy of your address proof, copy of valid Pollution Under Control (PUC) Certificate

Apart from a visit to the regional transport office, you will have to go to the insurance company, and submit a copy of No Dues Certificate, which you received from the bank

Step 3: Submit the Hypothecation Removal Application

Submit the duly filled Hypothecation Removal Application and attach the required set of documents to it

Step 4: Process to Receive the RC Smart Card

Now collect the ‘Acceptance Form’ that contains details mentioned on the RC. In case any corrections are required in the details, you must get it done. The changes (if any) will be reflected in the specific form.

• To collect the Smart Card RC you need to pay a fee.
• Collect receipt of the same, and you can take the Smart Card RC within a few days (date will be specified).
• Visit RTO for collecting the new RC Smart Card (sans hypothecation), on the given date.

After all these procedures, you will get rightful ownership of the car you had taken on car loan, with the bank ownership cancelled over the vehicle.

Whenever an EMI is missed, the bank charges a late payment fee which varies from bank to bank. Late payment charges of some major lenders can be found below: