Today, taking a car loan is as easy as walking into a patisserie and buying the pastry you have been craving for a while now. It’s getting simpler with every passing day.
The first thing that comes to your mind when you decide to take a loan is how much will the EMI be and whether it will burn a hole in your pocket or not. Yes, we all want to know that exact figure of the EMI and how it is calculated. It’s quite simple.
Each bank provides an EMI calculator on their website. You can use that or you can use an easy technique on Microsoft Excel to calculate what your EMI would be on the car loan you are taking.
With Excel, you are one mathematical formula away from calculating the EMI for your car loan. The function to calculate EMI on Excel is PMT and to carry out this calculation we need three variables - rate of interest offered (rate), the period over which you will repay the loan (NPER) and the present value of the loan (pv).
Formula: PMT (rate, NPER, pv)
Let’s take an example of Seema, a 28 year old Bangalore-based techie. If Seema buys a car for 10 lakhs, makes a downpayment of 5 lakhs and decides to take a car loan for the rest of the outstanding amount i.e. 5 lakhs at a rate of interest that is 10% for 4 years
The rate of interest used in the formula should be the monthly rate. Therefore - 10%/12= 0.83% or 0.0083
Also, the number of periods is the number of EMIs. Hence, EMI = PMT (0.0083, 4*12, 5, 00,000) = 12,672. This is the EMI Seema will be paying.
Similarly, if Seema chooses to pay this car loan on a quarterly basis, then EMI = PMT (10%/4, 4*4, 5, 00,000)
The EMI can be calculated through a mathematical formula as well. The EMI for your car loan can be calculated using the formula [P x R x (1+R)^N]/[(1+R)^N-1]. Here, P is the Principal or the outstanding loan amount, R is the rate of interest being paid on the principal every month and N is the number of instalments that we need to pay. The result will be the same as the one you get from the calculation on the Excel sheet.
It is not always possible to have an excel sheet around or the time at hand to use a mathematical formula to calculate the EMI on the car loan that you are taking. There are various car loan EMI calculators to do the same for you. One such car loan EMI calculator is that of bankbazaar.com where you can just put in your requirements and get the best deals and EMI that you will be paying in a snap. Use these to be sure of the amount you will be paying every month after you have taken the loan.
"Marepally Sravan is a passionate writer and loves to write about car loans. With a great deal of low interest rates, EMI for all things banking, To know more about car loans visit BankBazaar site now"