Car loan EMI in practice
An ₹8 lakh car loan at 9.25% for 5 years costs ₹16,704 a month and ₹2,02,235 in interest. Stretch it to 7 years and the EMI drops to ₹12,973, but interest rises to ₹2,89,731, while the car loses value every year.
The 20/4/10 rule
A popular rule of thumb: put down at least 20%, borrow for no more than 4 years, and keep the EMI plus fuel and insurance under 10% of monthly income. It keeps you from owing more than the car is worth.
Watch for flat rates
Some dealers quote a “flat” rate, such as 5% flat. Interest is then charged on the full loan for the whole term, which works out to roughly 9–10% on a reducing basis. Always ask for the reducing-balance rate (the APR) and compare that.
Used car loans
Banks lend for cars up to about 8–10 years old, usually at 2–5% more than new-car rates and for shorter tenures. Enter that rate above to compare against paying cash.
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Questions people ask
Can I close a car loan early?
Yes. Floating-rate loans to individuals have no foreclosure charge under RBI rules, but most car loans are fixed-rate, where lenders may charge 2–5% of the outstanding amount. Check your sanction letter.
Why does most of my early EMI go to interest?
Interest is charged on the balance you still owe. In the first years the balance is highest, so interest takes the bigger share. As the balance falls, more of each EMI repays principal. The year-by-year table shows this shift.