Question 1

How is car loan EMI calculated?

Accepted Answer

Car loan EMI uses the same reducing-balance formula as any other loan: EMI = [P × r × (1+r)^n] ÷ [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate, and n is the number of monthly instalments.

Question 2

What is a typical car loan tenure?

Accepted Answer

Car loans in India typically run 1-7 years — shorter than home loans, since cars depreciate quickly and lenders want the loan repaid well before the vehicle loses most of its value.

Question 3

Should I make a larger down payment on a car loan?

Accepted Answer

A larger down payment reduces the loan amount, which lowers both your EMI and total interest paid, and can also help you avoid being "upside down" (owing more than the car is worth) in the early years of the loan.

Question 4

Does the car loan interest rate depend on the car type?

Accepted Answer

Lenders often price new-car loans lower than used-car loans, since new cars hold value more predictably and are easier to repossess and resell if needed. Your credit profile and the lender also significantly affect the rate you are offered.

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