EMI Calculator for Car Loan: How to Calculate Your Monthly Payment
By SEOAnalytics Lab · Updated · 4 min read
Before you buy a car on a loan, you should know what the monthly payment will be and how much extra you will pay in interest. This monthly payment is called the EMI, short for equated monthly installment. It stays the same every month for the whole loan.
This guide shows how to calculate the EMI of a car loan, with a simple worked example, and how the loan term and the down payment change the total cost.
What is the EMI of a car loan?
The EMI is the fixed amount you pay the lender every month. Each EMI has two parts: interest on the balance you still owe, and a repayment of the amount you borrowed. In the first months most of the EMI is interest, and later more of it reduces the loan.
The EMI formula
For a loan with a fixed rate and equal payments, the formula is: EMI = P x r x (1 + r)^n / ((1 + r)^n - 1).
P is the loan amount, r is the monthly interest rate (the yearly rate divided by 12 and by 100) and n is the number of monthly payments. If the rate is zero, the EMI is simply the loan amount divided by the number of months.
Worked example: a 20,000 car loan at 8%
Say you borrow 20,000 at 8 percent a year. Here is how the term changes the cost.
- 5 years (60 months). EMI is about 405.53. You repay about 24,331.80 in total, so the interest is about 4,331.80.
- 3 years (36 months). EMI is about 626.74. You repay about 22,562.60 in total, so the interest is about 2,562.60.
- What it shows. The longer loan has a lower EMI, but it costs about 1,770 more in interest.
Step-by-step: calculate your car loan EMI
- Step 1: Find the loan amount. Take the price of the car and subtract your down payment. The rest is the amount you borrow.
- Step 2: Enter the yearly interest rate. Use the rate your lender offers, as a yearly percentage.
- Step 3: Enter the term. Choose years or months and enter the length of the loan.
- Step 4: Read the result. You see the EMI, the total interest and the total cost.
- Step 5: Try other numbers. Change the term or the down payment and compare the results before you decide.
How to lower the cost of your car loan
- Pay a bigger down payment. Borrowing less lowers both the EMI and the interest.
- Choose a shorter term. The EMI is higher, but the total interest is much lower.
- Compare lenders. Check the interest rate and the total cost, not only the EMI.
- Ask about fees. Processing and early repayment fees are not part of the EMI, but they add to the real cost.
- Pay extra when you can. If your lender allows it without a penalty, extra payments shorten the loan and cut interest.
What the EMI calculator does not include
The result is an estimate for a fixed-rate loan with equal payments. Processing fees, insurance and taxes are not included, and some lenders use a flat rate on the original amount, which costs more than the same number on a reducing balance. Confirm the final figures with your lender. This is general information and not financial advice.
Calculate your EMI now
Enter your loan amount, rate and term in the Loan Calculator and see your EMI in a second. Your numbers stay in your browser. It is free and needs no signup.
Frequently asked questions
How do I calculate the EMI of a car loan?
Use EMI = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the loan amount, r is the monthly rate and n is the number of months. Or enter the numbers in the Loan Calculator.
Does a longer car loan save money?
It lowers the monthly EMI, but you pay more interest in total. A shorter term costs more each month and less overall.
Does the EMI include insurance and fees?
No. The EMI covers principal and interest only. Fees, insurance and taxes are extra, so check them with your lender.
Can I use the same calculator for a personal loan?
Yes. It works for any loan with a fixed rate and equal monthly payments.