Saturday, 31 December 2016

Learn How EMI is Calculated

An EMI(Equated Monthly Instalment) is a fixed amount of payment you have to make when you take a loan. It contains both the principal amount as well as the interest amount.
You need to calculate EMIs for a particular loan in advance so that you can manage your future expenses accordingly.
How is an EMI calculated?
Here is the basic formula for calculating an EMI:
[P x R x (1+R)^N]/[(1+R)^N-1]
Here P is the loan amount or the Principal, R is the rate of interest per month, and N the number of instalments.
To understand the formula better, consider the following example:
Let the loan amount be Rs. 6,00,000, rate of interest be 10%, and tenure duration be 10 years (or 120 months). Comparing with the formula we have:
P= 6,00,000, R= 10/(12X100)= 0.0083, and N= 120
So, EMI = [6,00,000 X 0.0083 X(1+0.0083)120]/[(1+0.0083)120-1]
EMI= [6,00,000 X 0.0083 X 2.696] / [2.674]
EMI=  Rs. 5020.97
Calculating an EMI using the formula above can be time-consuming, especially if you have several different loans to compare. Thus, using an EMI calculator is a better solution.
What is a loan EMI Calculator?
An EMI calculator is a special tool designed specifically for calculating EMIs. It can save you a lot of time which you would otherwise have to waste by calculating the EMIs for a particular loan using a standard calculator.
How EMI Calculators are Helpful
What is first step you take when you have to take a home loan, or a car loan? Do you start applying for the same right away? Of course not. You have to do some planning first. So, you sit down and do some calculations. You decide how much amount you would need to borrow, and then take the interest rate into account to calculate the approximate EMIs. If the EMI's are high then you will need to either find a bank who can offer lower interest rate, or have to increase the tenure of the loan itself, so that EMIs becomes smaller.
Using conventional EMI calculation methods is a tedious process as it is, but when you have to adjust certain factors such as  the tenure, or the rate of interest, when it becomes an even bigger problem. An EMI calculator is the perfect solution for this problem. Most online EMI calculators are really simple to use. You can get different EMI results almost instantly when you change different factors in the formula. This makes finding the most suitable loan structure easy and quick.
Advantages of EMI calculators
There are many advantages of using EMI calculators, the best of which are as follows:
·        Different Calculators for Different Loans: One of the best things about EMI calculators is that they are specific to different types of loans. For instance, if you want a home loan then you can use a home loan EMI calculator, and if you want a personal loan you can use a personal loan EMI calculator. Since the EMIs of different types of loans have to be calculated differently, an EMI calculator can be used for the calculation of accurate EMIs.
·        Detailed Information: When you calculate EMIs using a pen and paper, or with a calculator, all you get is a final number. However, with an EMI calculator you get a lot more than that. Most EMI calculators give your results in the form of charts and tables which show exactly how much will you be paying every month, along with the reducing principal and interest amount.
·        Accuracy: Even if you are a math genius, you have admit that with pen and paper there is always a margin for errors. When you have do a lot of calculations with different interest rates, principal amounts, and loan tenures, then the risk of making an error is high. An EMI calculator, however is quite accurate.

Whether you are looking for instant personal loans, or distance education loans you have to calculate EMIs for different loan options. If you want accurate results be sure to use an EMI calculator. It will save you a lot of time. 

Friday, 23 December 2016

5 Hacks to Clear Your Debts Fast

No one wants to be burdened with huge debts. However, in today's expensive world, most of us have to take a loan at one point or the other, and with that debt becomes inevitable. If your debt has been accumulating greatly then it is important that you clear it up as soon as possible. Increasing debt can lead to a poor CIBIL score, and damage your creditworthiness. Since there is no instant solution that can work as a bad credit fix, you must take several measures. Only then you can get rid of  your debt and improve CIBIL score. Here are some of them:
1. Debt Consolidation
When your debt situation is getting out of hand, a great hack could be debt consolidation. This is particularly useful if you have multiple loans. In debt consolidation all your individual loans are combined into one, and the final sole interest rate is lower than what you have been paying currently. Thus, debt consolidation helps you in two ways:
·        Since your loans are merged into one, managing expenses becomes easier. You can track your payments easily, and have better control on your money.
·        With a lower interest rate you can save money every month, and pay your debts sooner.
If you want your debts to be consolidated you can simply discuss the same with your bank officials. You have the right to bargain on the interest rate, and you must. If you have been a loyal customer to your bank you stand a good chance of getting an attractive interest rate.
2. Refinancing Your Mortgage
One of the benefits of a mortgage is that you can refinance it to get a better deal. Say you got a mortgage loan at an interest rate of 14%, but after few years the government caps the mortgage interest rate at 13% for all private and public finance institutions. If bank doesn't agree on lowering your interest rate, you can approach another bank who is willing to have your mortgage transferred to them, and let you repay it at a lower rate.
3.Getting A Second Job
Desperate situations sometimes call for desperate measures. If you are really inclined towards getting rid of your debt, then by taking a second job you can drastically shorten the repayment duration. It can be difficult to manage two jobs simultaneously, but once you have fully repaid your personal loan or home loan, you can certainly enjoy the fruits of your hard work. Besides, there are many easy ways to make extra money. If you are good at something, such as coding, or writing, then you can take on freelance based assignments, and make decent money. You can also check if you can make more money by working overtime at your office.
4. Paying More Than Minimum
Most people are unaware of the toll minimum credit card payments take on their accounts. When you make minimum payments, you are not charged any penalties, but the remaining balance is carried over to the next month, and accumulates interest. If you have been sticking to minimum payments since a long time, then it is possible you have been causing your debt to increase without even your knowing it. Thus, to avoid this from happening make sure you pay your credit card payments in full.
5. Getting Help From a Debt Counsellor
Sometimes it is wise to accept your own limitations and take help from someone who has experience with something more than you. You can always consult a credit or debt expert to look into your situation and offer most viable solutions to tackle it. For instance, Credit Sudhaar is one of the leading credit and debt counselling firms in India which can help you with your debt related problems. With the help of someone who has a lot of experience with assorted debt related problems you can certainly get rid of your own debt sooner than expected.
Accumulating debts can put high pressure on you, and affect your life greatly. However, if you are willing to take bold steps then you can certainly tackle the situation. You are also of course free to take external help. A guided approach will certainly facilitate the entire process and make things a lot easier.



Friday, 16 December 2016

It is A Good Idea to Take a Personal loan for an Overseas Trip?

People in India take loans for education, home renovation, medical emergencies, and even for vacations. However, a personal loan for an overseas trip (which can be usually quite expensive) can rarely be a good idea.
Why Does a Personal Loan for an Overseas Trip a Bad Idea?
Most personal loans can be obtained without collateral. You are free to use the loan for anything, and that is a big advantage. However, this advantage comes with a catch- huge interest fees. After all, the lender is granting you a loan collateral-free, thus taking a risk. This is why you have to pay high interest rate for the same.
It is important to understand the difference between good loans and bad loans. Among all possible reasons for taking a personal loan, an overseas trip(especially the one that is purely for fun and leisure) is probably the worst. The reason is simple- the loan you take for an overseas trip/vacation that lasts for 4-10 days have to be paid back with a hefty interest of 14-24% over an year of so. This is an absolutely extravagant transaction that can be easily avoided.
Another reason why a personal loan for a foreign trip should be avoided in because such a loan won't be an appreciated investment. For instance, a home loan, or a car loan are appreciated investments, which gain value over time, and hence improve your credit worth. A personal loan puts you in bad light, especially if you are taking it for an overseas trip. While you are entitled to spend the loan however you like, it may have consequences on your credit report.
 Risks Involved
Even if you are a great planner, and have spend a lot of time planning your trip, you can never predict the future. If you are overseas and your expenses cross your budget you may end up turning to your credit card for help. Since you already have a personal loan to take care of, the credit card bills (which can be quite high when the card is used in another country) can add to the financial pressure.
Another risk that comes with using a credit card overseas, is that if you have reached your borrowing limit, then you can't use the card for paying the personal loan EMI if need be. You can end up in huge debt, which can further make situation worse as it will continue to collect interest. Your credit score will be damaged, and you could end up making it to the CIBIL defaulters list.
The Verdict
If you have to take an overseas trip for a vacation then you should absolutely avoid taking a loan of any kind for the same. However, in some cases taking a personal loan can be fine. For instance, if the loan is of small amount, or the trip begs emergency, then you can take a personal loan. But still, it is best to avoid taking a personal loan at all costs. If possible, you can use your credit card for the same.
If you absolutely have to take a personal loan for a trip overseas, then make sure you take care of the following:
·         Planning: Make sure you get your numbers right before taking the trip. Calculate how much will the trip costs, including a margin for unexpected expenses.
·         Credit Card: Do carry your credit card with you, but make sure you only use it if absolutely necessary. It is easy to be swayed in the spirit of enjoyment in a different country, and you may want to spend on luxuries on a whim. Such ideas need to be controlled, for you will have a debt waiting for you to be taken care by back at your home.
·         Loan Comparison: Do spend your time in comparing all possible options for personal loans. Online lenders generally offer low interest rates on personal loans.

Loans should always be taken for emergencies, or for necessities. If you are taking it for a luxury then you can end up with troubling financial issues. Thus, use them wisely.

Friday, 9 December 2016

What are the Major Credit Reporting Agencies in India?

There are four major credit reporting agencies in India that are recognized nationally. All these agencies collect information of the credit users, calculate credit ratings on that basis, and sell the credit reports for profit. These four agencies are- CIBIL, Experian, High Mark, and Equifax.
Although the primary job of all the major credit reporting agencies is the same, their operation, prices, and systems are slightly different from each other.
CIBIL
Not only CIBIL is the oldest credit information bureau of India, it is also the most popular. It was established in 2000, and has been the most preferred credit agencies by the financial institutions ever since.
CIBIL assigns a score ranging from 300 to 900 to every credit user. The higher is the score, the higher is the creditworthiness of the individual.
To obtain a one-time cibil report and score from CIBIL you have to pay a fee of Rs. 550. However, you can also purchase a subscription for receiving the report 2 to 4 times a year. If you are only interested in your credit report, and not the score, then you can apply for the same for a fee of Rs. 159. You can receive your CIBIL report via email, or you can also get a physical copy at your residence. It depends on the answers given by your when you apply for the report on CIBIL's website.
If there is a CIBIL dispute between a customer and the lender, then the agency offers the facility for a resolution. You just need to fill out a form on their website and mention the details of the dispute.
Equifax
Equifax obtained its licence for operation in 2010, and is one of the most widely known credit information bureaus of India.
The credit score range followed by Equifax is also 300 to 900. A score higher than 750 is deemed good, and lower than 500 is considered poor. You can get a detailed credit report from Equifax for a fee of Rs. 400. You can also choose to get only the basic report, for which you have to pay Rs. 138. Typically, it takes about a week or so for Equifax to verify your documents and send the report.
If you want to resolve a dispute, you can download the dispute resolution form from Equifax's website and submit it with a few documents.
High Mark
High Mark was founded in 2007, and received a Certificate of Registration from The RBI to operate as a Credit Information Bureau in India in 2010.
The score range followed by High Mark is the standard 300-900. You can obtain your credit report that contains the score as well for Rs. 399. To raise a dispute regarding your score or report you can contact CRIF by filling out a form on their website.
High Mark is a product of CRIF, which is leading global company in the industry of credit reporting and business information. It is operating in 4 countries, and supporting more than 3,000 banks and 44,000 companies.
Experian
Experian is also a global information services company that provides data and analytical tools for businesses across the world.
Unlike other credit information companies of India, Experian has a functional score range of 300 to 999. You can obtain your report by paying Rs. 138 either through DD or NEFT transfer. If you want both the report and the score then you have to pay Rs. 399.
To raise a dispute with Experian you can fill out an application form on their website and submit certain documents for verification.
Although there are multiple credit information companies in India, they are essentially the same. However, since most banks and other financial institutions rely on CIBIL score only, that's the one you should generally refer to. It is the most prominent credit bureau of India, and its processing of applications is also really fast.
No matter which credit bureau your lender prefers, having a high score is a must if you want a loan, or a credit card. If you want to improve CIBIL score fast, by either taking a home loan, education loan, etc. then you can always take professional help from an reputed agency such as Credit Sudhaar. 

Thursday, 1 December 2016

How do I Assess my Creditworthiness?

If you are going to apply for a SBI car loan, icici personal loan, or rather any kind of loan then your creditworthiness will be a crucial factor in the approval or rejection of your application. Almost all lenders base their judgement on the applicant's credit history, and other factors that sum up the creditworthiness.
Even though different lenders have different standards for measuring creditworthiness, almost all will take 3 C's into consideration. You can use these to assess your creditworthiness.
Capital: This refers to the capital you possess, or in other words- the balance in your accounts. Lenders also check your monthly earnings to understand your creditworthiness. If you are making a decent income, which is consistent, then you are likely to have high creditworthiness.
Collateral: Capital alone is not sufficient in determining how reliable you are credit-wise.  If you have any property that can be pledged for security then the lender can get comfort in the same, and feel safe with sanctioning your loan. However, if the property is already pledged against some other loan, then they can't use it for security, and may want to wait until the loan has been paid off.
Character: Believe it or not, your character can make a huge difference in your creditworthiness. Have you ever declared bankruptcy in the past? Has your name ever been on loan defaulters list? Does your credit report reflects poor money management? By answering these questions you can learn a lot about your credit-related actions, which actually affect your loan applications.
For personal loans that are to be used for business investments, lenders also take some additional factors into account for assessing the applicant's creditworthiness.  These are:
Conditions: Economic and industrial events may occur during the tenure that may affect your business. For instance, rise in the prices of raw materials that your business is dependent on, or employee strikes, etc. can damage your business, and pose a risk for the lender as you can have difficulty repaying the loan.
Inventories: The inventories that you own also affect your creditworthiness. However, unlike most people believe, a large inventory doesn't pass for collateral that the lender may take as a backup for security. In most cases lenders don't expect any business to make enough money selling off inventories for repaying their loan, especially in a short period. What they consider a good sign though- is how fast you rotate your inventory. This shows how efficient or successful your business is.
Other than the factors above there is one major aspect that is the most important for reflecting reliance to your lenders- CIBIL rating.
Your CIBIL score and CIBIL report will determine how likely you are to get a loan or credit card approved in the future. To get a personal loan for low CIBIL score is almost impossible in today's economy. Banks have become more stringent than ever. Thus, if you want to truly assess your creditworthiness, make sure you check your credit score first.
How to Check Your Credit Score?
There are a few major credit bureaus in India that provide credit reports for individuals and businesses. However, the one that's most recognized all over India is CIBIL (Credit Information Bureau India Limited). Thus, you can check your CIBIL score to get an idea of where you stand with your credit usage. Fortunately, obtaining a report is simple. All you have to do is go to their website and fill out a form, and upload a few mandatory documents. If all goes well, you can get your report within a few days, either via email or at your home via snail mail.
A CIBIL score ranges from 300 to 900 for everyone. Generally, a score that is greater than 750 is considered decent. If yours is lower than that, you can start paying your EMI's timely, and use your debt wisely to improve it. If your score is lower than 500 then it will be tagged as "poor". You will need to make a lot of changes in your credit spending habits to improve the score.


Thursday, 24 November 2016

Things That You Must Consider Before Taking a Home Loan

Having your own house gives you a strong sense of security; there are no two ways about it. However, real estate isn't cheap. If anything, it costs more than ever today. This is why many people have to take a home loan to meet the financial requirements of a home purchase. However, home loans have many moving parts, that you must become familiar with before signing any papers.
Here are some things you should know before taking a SBI home loan, IBDI home loan, or any other bank's loan:
Credit Score
If you are going for a conventional approach, then having a high credit score or CIBIL score is a must for any kind of home loan. Almost every bank you will apply the loan at, will check your CIBIL score when considering the application. Thus, make sure you check your credit score first, before you start applying. If your score is less than 750, then it is better than you spend some time to improve CIBIIL score.  Once your score is in decent shape, you can secure a higher chance of loan approval.
Types of Interest Rates
Not many people know about this, but there are two types of interest rates, which are- fixed rate, and floating rate. In a fixed rate, your EMIs remain the same throughout the tenure of your home loan. However, in a floating rate, your EMIs may change during the tenure, if the bank changes the interest rate in future. Both types of rates have their own advantages  and disadvantages:
·         Fixed Rate: This option is secure and stable. Since your EMI is fixed throughout the tenure, you can manage your finances easily. However, if your bank reduces the interest rate in future, then you won't be benefitted from it.
·         Floating Rate: Floating rate is risky, but it comes with a big advantage. If the bank lowers the interest rate in future, then your EMIs will also become smaller. The opposite situation brings a risk. That is, if the interest rate increases, then your EMI's will also become bigger.
When you apply for a loan, make sure you ask your bank about the type of interest rate that is associated with it. Choose your option wise, as both have their own set of upsides and downsides.
Extra Charges
It is important to know about the extra charges that may have to pay for taking a home loan. Depending on your situation, the cumulative charges can be a lot. Some of the common extra charges include administrative fee, service fee, processing fee, etc. Some of these could be directly proportional to the loan amount.
Make sure you get detailed information on the extra charges, and add it to the loan amount, so that you can make your final decision wisely.
Types of Home Loans
Depending on your requirements you can take the most suitable form of home loan, for the options are many. Here are some of the most common types of home loans:
·         Home Construction Loan: In this type of loan, you have to get an estimate of the home you want to construct, and then apply for the loan with the same amount. The lender will take the value under consideration, and approve or reject on the basis of the same.
·         Home Purchase Loan: In this you directly apply for a pre-constructed home. Since you already have the actual price in order, you don't have to do a lot of calculations, and merely apply for the loan at a bank.
·         Home Conversion Loan: If you already have bought a home through a loan, but now wish to buy a new home, then you can have the loan transferred to the latter. You don't have to repay the previous loan this way.

Taking a home loan is a big responsibility. Thus, you should do all your homework, and do as much research as possible, before finally zeroing in on one. Also, make sure you compare all kinds of viable loans, and choose the best one.

Wednesday, 16 November 2016

How Can I Get Best Deal on a Personal Loan?

In a perfect world no would need to borrow money for anything. However, truth is we don't live in one.  Majority of us would need to get a personal loan in life, at some point or the other.  Fortunately, banks and NBFCs have made it quite easy and simple to apply for a loan. Not only that, they often roll out exciting offers, such as low interest rates, flexible repayment options, etc. to attract their customers. You can even go for P2P (Peer to Peer) loaning options, that allow you to apply for a loan on the Internet, and get funds within a day or two. However, when so many options are available, it certainly begs the question- "how do you get the best deal on a personal loan?".

There are a lot of things that you can do to ensure you get the best possible deal on a personal loan. Some of these include:
Comparison
There is a lot of competition in the banking sector today. Banks are vying against each other in the bid to attract customers towards personal loans. Thus, you can notice a considerable difference in the interest rates offered by different banks. The terms and conditions may also vary greatly. Thus, if you want to secure the best possible deal on a personal loan, it is important that you perform a through comparison among all the viable banks. 
Establishing the Upper Hand
You can only expect a good deal when you can prove that you have high creditworthiness. The easier you will make it for a bank to trust you, the easier it is to get a good deal. If you are going after a traditional bank for the loan, then your credit score will play a significant role in the process. Thus, by working on your score beforehand you can have the upper hand when negotiating rates with a bank. With a promising credit report you can take advantage of leverage, and convince the bank to offer lower rates.
Grabbing Seasonal Offers
If it is possible, you can wait for a festive season before applying for a personal loan. This is because a lot of banks release attractive seasonal offers. In fact, thanks to the tough market, banks have begun to implement all kinds of marketing techniques to increase the no. of sanctioned loans per quarter. If you can just wait for the right time, and thus the right offer, you may get the best deal on a personal loan.
Checking Out Online Lenders
Online lenders are giving tough competition to the traditional banks and NBFCs today. Whether it is about interest rates, tenure flexibility, or the entire process of obtaining the loan itself, they are able to excel in everything. Thus, you can check out if you quality for an online loan, and compare it with the traditional counterparts. Since there are plenty of online lenders that have emerged lately, you can compare them too.
Understanding The Method of Interest Calculation
If a bank or NBFC is offering you a personal loan at a really low interest rate, then make sure you go through the full details before signing up for it impulsively. Sometimes, to trick customers banks offer low interest rates, but these are flat rates, which don't consider gradual reduction of principal amount, and the interest amount.
What you should ideally seek in a personal loan is a diminishing rate, rather than a flat rate. With a diminishing rate, your interest amount gets smaller and smaller as you pay your EMIs. This is because the interest is calculated on the outstanding balance, which gets smaller with time. 
A loan is a huge financial responsibility, and since it stays with you for many years, it helps to get the best deal possible. In fact, the same goes for a home loan, higher education loan, used car loan, or any other kind of loan. Thankfully, with the help of Internet you can do enough research to find a loan that fits your budget, and your financial situation. At any rate, having a good CIBIL score always helps when dealing with a lender. So, make sure you have a good one before you get on board.


  

Wednesday, 9 November 2016

How to get the best deal on your personal loan

Loans are the need of modern life. There are so many expenses you can source from different types of loans. Personal loans are however one of the fastest disbursed loans wherein you also get flexibility to use credit for different purposes. Unlike auto loan, education loan or home loan, the purpose of personal loan is not defined. With minimum documentation, these small scale unsecured loans are easy bets in the times of financial emergencies.

However it is imperative that you know how to make best use of the different types of personal loans and find the best deal as per your requirement. Here are some quick tips to follow before you apply for a personal loan.
1.       Be it a foreign vacation with the family, education of your kid, medical emergency, renovation of your office/ home or a luxurious shopping spree for an upcoming celebration in your life, a good score would help you get a personal loan of choice.  However it is imperative that you do your homework well and compare personal loans offered by different banks.

Thus as a thumb of rule, compare different deals before you finalise one. Comparing not only helps you find the cheapest deal but evaluating different banks’ offers also educates you. This will help you compare the interest rates and total cost of the loan, and you would be able to make a learned choice at the best price.

2.       While comparing the personal loans interest rates, check out all the expenses. The cost of loan includes, monthly installment, bank’s processing fee, documentation charges and pre closure charges. So do not just stick to interest rate when comparing two offers.

3.       Next point in consideration should be an article for pre-closure of the loan. Some banks charge if you opt for pre closure of loan. So, if you wish to close the loan in the middle of the term you should clearly study this article and find the deal that doesn’t add cost to loan if you pre close it.

4.       There are many factors that can help you get a better loan deal. Take for example, you already have a loan account with ABC Bank and you are regular in your payments. The ABC bank may offer you a good deal as you are a steady customer. So if you use a credit card or have a loan from a bank, try to negotiate your request from the same bank. A bank is also interested in retaining its diligent, old customers.

5.       Not to mention, one of the most important factors that help you get the best loan deal is your credit score. A good score increases your credit worthiness and reduces bank’s risk metric. Thus with a good score you naturally become an eligible customer of a bank for lending money. According to CIBIL, 80 per cent of people with 750 or more score can access bank products as per their choice.

6.       A bank always prefer to lend to those who can repay the loan. So your job details, employer’s or company’s reputation, your personal assets such as a house, car or other assets besides your cibil score also add to your eligibility for a personal loan.

7.       Your interest rate would also depend on the number of years you want a loan for. Usually a long term loan has less steeper interest rate.

8.       As personal loans are unsecured loans, you would find that popular banks such as SBI, PNB, HDFC and alike, often offer the best deals. They are usually the first ones to announce the RBI’s repo cut on interest rates. They often offer good festival offers too. So festival time indeed could be the time to get the new credit line.

9.       If in case you lack a credit history or are just employed, you should apply for a credit card and get a secured loan. This would help you build a good history within six months and later on you can try other avenues of credit.

10.   Last but not the least, apply for personal loan only in case of emergency. For, there are other credit options that are cheaper. A secured loan is always cheaper because of collateral or security. But an unsecured loan is most risky offer by a bank. So without having an extra ordinary reputation, interest rate of personal loan is ought to be more than education, auto, or home loan.


Knowing these points I hope you are more confident about getting the best personal loan deal.

Thursday, 3 November 2016

How to Understand Car Interest Rates

A long-term car loan that comes with a low interest rate can make buying your favorite car affordable and easy. However, is it wise to just go with any kind of loan? To choose the best auto loan you must know how car interest rates work.
Here are 3 of the most important factors that you must take into account when choosing a car loan-
1) Car loan interest rate- If you will compare different auto loans that are available in the market you will be surprised to see the difference in their interest rates and conditions. For instance, the SBI car loan floating interest rate is 9.65% - 9.70%, of United Bank of India is 10.00% - 10.50%, and of Corporation bank is 10.20% - 10.70%. As you can see there is a good different between them all. Even though the difference is a small percent it can make a big difference in the long term.  According to most finance experts a car salesman can either give you a great deal on your car or an excellent financing. It is rare to get a deal that lets you enjoy the best of both worlds. So, unless you compare car loan interest rates that are available you can’t find the best deal.
2) Getting the Best Deal- Thanks to the high competition and the drive for closing-deals that car dealers have you are often offered incentives from the financer when you apply for an auto loan. However, they can choose to shape the deal the way they want and you have to understand what kind of system works best for you. For instance, if the manufacturer is providing discounts your dealer may instead offer you  lower EMIs. Say, you take a Rs 4-lakh loan at 12% interest rate for 5 years. The EMI will cost Rs 8,810. If the discount provided by the manufacturer is Rs. 25,000 your dealer could reduce it from the loan amount itself, making your EMIs as low as Rs. Rs. 8,200. Or, instead he can decide to tell you that he can give you a lower interest rate of 9%. Comparing the two a lower interest rate is a lot better in the long run.
3) Math of Car Loan Interest Rate
A car loan interest rate is calculated neither on “simple” interest rate system nor on “compound” interest rate system. Instead the interest is calculated on the outstanding amount that changes every month as you continue to pay EMIs that reduce the principal.
To help you understand how the calculations are done here is a schedule that is based on a car loan of Rs. 100,000 for 12 months at a car loan interest rate of 12%-
EMI Number
EMI Amount
Interest
Principal Paid
Principal Outstanding
1.
Rs.8885
Rs.1000
Rs.7885
Rs.92115
2.
Rs.8885
Rs.921
Rs.7964
Rs.84151
3.
Rs.8885
Rs.842
Rs.8043
Rs.76108
4.
Rs.8885
Rs.761
Rs.8124
Rs.67984
5.
Rs.8885
Rs.680
Rs.8205
Rs.59779
6.
Rs.8885
Rs.598
Rs.8287
Rs.51492
7.
Rs.8885
Rs.515
Rs.8370
Rs.43122
8.
Rs.8885
Rs.431
Rs.8454
Rs.34668
9.
Rs.8885
Rs.347
Rs.8538
Rs.26130
10.
Rs.8885
Rs.261
Rs.8624
Rs.17507
11.
Rs.8885
Rs.175
Rs.8710
Rs.8797
12.
Rs.8885
Rs.88
Rs.8797
Rs.0

If your bank is a private bank then the car loan interest rate is reduced on a monthly basis, and if your bank is a nationalized bank then in most cases it reduces on a daily basis.

Choosing a car loan often comes with a trade off. Having small monthly EMIs can be an excellent option if you are on a tight budget but it also means you will be paying a lot extra in the form of interest. On the other hand you can save a lot of money on the interest by paying higher EMIs but it can force you to cut down on your expenses. It all comes down to your own requirements and conditions. At any rate, make sure you compare different car loans before you zero in on one.