A car loan is a type of personal loan that allows the borrower to purchase the vehicle of his choice. The loan is then cleared through monthly payments at a particular interest rate and tenure. Many banks offer great auto loans at attractive interest rates today, making it more convenient for individuals to own their dream car!
But before opting for an auto loan, consider the loan amount and plan a budget accordingly.
A number of factors determine the final amount that needs to be paid when purchasing a car. Similarly, these factors determine the auto loan amount that one needs to apply for.
The best way to calculate the loan payments in order to purchase a car is through a car loan calculator. One can effectively use this calculation tool to accurately calculate the nature of his payments during the term of the car loan.
The three major factors upon which the payment of a car loan depends are-
1. The price that one pays for the car after including all trade-ins
3. The down payment
Once, the borrower is aware of the above three numbers, he can calculate the EMI that he needs to pay after including the interest rate on the car loan.
How to calculate car loan payments?
Any car loan calculator will ask for the below mentioned basic information. This includes-
• Price of the vehicle
• The amount of down payment
• Interest rate
• Tenure of loan
Car loan calculators that offer greater detail, may also ask for sales tax paid on the car. Using a car loan calculator is fairly simple and will allow one to plan his auto budget accordingly. One can get access to a car loan calculator online on various websites.
While car loans are easily available in the market, one should be extremely careful when applying for this type of a loan. Dealers are offering long term auto loans to make expensive cars more affordable for customers. There was a time when the tenure of a car loan was maximum 60 months, but today dealerships also offer a tenure of 6-7 years on car loans.
The longer the loan, more is the interest that has to be cleared. Thus, in the long run the loan turns out to be more expensive than the car purchase. Discuss all the aspects of the loan with the dealer first.
Before opting for a long term car loan, use a car loan calculator to ensure if it is feasible to pay back such a loan amount.