How to calculate Car loan EMI in India?

Nowadays, in India, it is not very hard to purchase a private vehicle like a car. Almost every company or third-party companies provide you with a very good option that helps you to purchase a car though you do not have enough money in your account. As we know this facility is called EMI.

Today we are going to have a proper look at EMI and then we will understand how we can calculate car loan EMI. firstly, let’s understand the basic meaning of EMI.

EMI ( Equated Monthly Installment )

EMI is simply the same amount to be paid to a particular party on monthly basis. As you have purchased some product on EMI, you will be given some particular amount which you are supposed to pay till the decided duration.

EMI is really a helpful invention in this finance world. Almost every company provides you with the facility of EMI or we can say to purchase a product on EMI.

As we know India is a developing country and this EMI facility make some important product available to the customers which help our country to be stronger in any industry.

If we talk Especially about the automobile industry, this EMI facility helps a lot in terms of product sales and profitability.

Let us understand the whole process of EMI calculation of cars in India.

the formula to calculate car loan EMI is P x R x (1+R)^N / [(1+R)^N-1]


 P is the main principal amount of the car loan.

R is the interest rate of the loan 

N is the exact number of installments in a monthly timeframe.

let’s understand it using a practical example.

Assume you are going to buy a car on EMI. The principal amount of the car is 10L, and the rate of interest is 12% per year for a tenure of 2 years.


R= 12/100/12 ( 12%= 12/100 and to calculate it in months divided by 12)

N= 2*12( calculation in months)

EMI=P x R x (1+R)^N / [(1+R)^N-1]

      =10,00,000*12/100/12*(1+12/100/12)^2*12/ [((1+12/100/12)^2*12)-1]

     =47,000 (Approximately)

You can use an EMI calculator as well for the same process if you want to avoid the calculations.

Till now we have gone through the steps of EMI calculation and details of it. Now we will look at important FAQs regarding EMI.

How much amount I can get as a car loan from the banks?

    In general, banks give a maximum of 4X the amount to your annual income package. So for example, if you are having a package of 5 lac annually, then you are eligible to get a loan of 20lac from the bank.

    Can we do car loan EMI calculation online?

      Yes of course. In this era of digitalization, you can use online car loan EMI calculators and calculate the EMI in just a few seconds. In order to find a car loan EMI calculator you are supposed to type “car loan EMI calculator” on google and this is how you will get your EMI calculator.

      What is the general tenure of a car loan?

        As we are considering the Indian market, generally the Indian people take the loan and the tenure is in between 1-8 years. If we look at the same number in months then the car owner has to pay the EMI for 12 months to 96 months.

        I forget to pay EMI this month. Are there any consequences for this?

          Yes, as you have bought this car using a loan amount, you are supposed to pay the money as an EMI in a timely. If you miss it, it is going to affect your credit score. A credit score is basically a tool for banks to understand consumer behavior. So paying EMI every month on time is going to help you in upcoming future if you need a loan from the bank.

          I have taken a car loan EMI to buy my car. Now I want to sell my car. Can I?

            As per the rules and regulations of car loans, EMI is designed by the banks or we can say financial institutions if the car is bought on EMI and the EMI is not fully paid then the car owner is not allowed to sell the car.

            So you are advised to fully pay your remaining EMI payment s and then you are allowed to sell your car.

            I want to pay my car loan EMI in advance. Is it possible?

              Yes of course. Paying car loan EMI in advance is not just an advance payment but it is going to help you to gain a good credit score. which you may need in the upcoming future. 

              I don’t want to pay EMI anymore. I want to pay the whole amount at a time. Can I do it?

                As per the rule, once you requested and then got submitted the request for the EMI, this can not be canceled or edited until the EMI cancellation request is approved by the bank of the credit card holder or we can say a car owner.

                Do I need to initiate the transactions of EMI, if I buy a car on a car loan EMI?

                  No there is no such need to initiate the transactions all the time. Banks provide you with an important service that automatically deducts the amount from your payment account. The only thing to take care of is you must have linked your bank account to the debit card, which is linked to the portal of car loan EMI. 

                  What is the exact penalty for not paying the car loan EMI on time?

                    If we look at the exact penalty amount then it totally depends on your loan amount. In percentage terms, the penalty for not paying EMI on time is 3.5% straight.

                    These are some of the important which might make you confused. Kindly consider it for the Indian market only. This is all about car loan EMI and how we can calculate it. Hope you have got a solution from this article.

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