What is a Car Loan EMI Calculator?
A Car Loan EMI Calculator helps you estimate your monthly Equated Monthly Installment (EMI) for a car loan. It considers the loan amount, interest rate, and tenure to calculate the fixed monthly payment you'll need to make throughout the loan period.
This calculator also shows the amortization schedule (month-by-month breakdown) and helps you analyze how prepayment can reduce your interest burden.
Car Loan Interest Rates in India (January 2026)
| Bank | New Car | Used Car |
|---|---|---|
| SBI | 8.75% - 9.85% | 11.25% - 12.85% |
| HDFC Bank | 8.20% - 9.40% | 11.50% - 13.50% |
| ICICI Bank | 8.50% - 9.75% | 11.00% - 13.00% |
| Union Bank | 7.40% - 8.90% | 10.50% - 12.00% |
| Canara Bank | 7.65% - 8.85% | 10.75% - 12.25% |
Rates as of January 2026. Actual rates depend on credit score, loan amount, and bank relationship.
Car Loan EMI Formula
Where:
P = Principal (Loan Amount after down payment)
r = Monthly interest rate (Annual Rate / 12 / 100)
n = Total number of monthly installments
Example: ₹6 lakh at 9% for 5 years
r = 9 / 12 / 100 = 0.0075
n = 5 × 12 = 60 months
EMI = [6,00,000 × 0.0075 × (1.0075)^60] / [(1.0075)^60 - 1]
EMI = ₹12,454 per month
Understanding Amortization
Amortization is the process of paying off a loan through regular payments. Each EMI consists of two parts:
- Principal Component: The amount that reduces your loan balance
- Interest Component: The cost of borrowing, paid to the lender
In the early months, most of your EMI goes toward interest. As the loan matures, more goes toward principal. This is why early prepayment saves more interest.
Prepayment and Foreclosure Rules (RBI 2026)
• Floating-Rate Loans: No prepayment or foreclosure charges allowed
• Fixed-Rate Loans: May charge up to 2-3% of outstanding amount
• No Lock-in Period: You can prepay from day one
• Any Source: Prepayment allowed from any source of funds
Banks must clearly mention prepayment terms in loan agreement and Key Facts Statement (KFS).
Reduce Tenure vs Reduce EMI: Which is Better?
After making a prepayment, you have two options:
- Reduce Tenure (Keep EMI same): Finish loan faster, save maximum interest. Best if you can afford current EMI comfortably.
- Reduce EMI (Keep Tenure same): Lower monthly burden immediately. Best if you need cash flow flexibility.
Example: On ₹6 lakh loan at 9% for 5 years, a ₹1 lakh prepayment after 1 year saves ₹34,790 if you reduce tenure vs ₹19,450 if you reduce EMI.
Frequently Asked Questions (FAQs)
What documents are needed for a car loan?
Typically required: Identity proof (Aadhaar/PAN), address proof, income proof (salary slips/ITR), bank statements (6 months), car quotation, and photographs. Salaried employees may also need employment proof.
Can I get a car loan with a low CIBIL score?
Most banks require a minimum CIBIL score of 700-750 for car loans. With lower scores, you may face higher interest rates or loan rejection. Some NBFCs offer loans for scores as low as 650 at higher rates.
Is it better to take a shorter or longer loan tenure?
Shorter tenure means higher EMI but lower total interest. Longer tenure means lower EMI but higher total interest. Choose based on your monthly budget while minimizing interest payment.
Can I transfer my car loan to another bank?
Yes, car loan balance transfer is possible if another bank offers a lower interest rate. With RBI's 2026 guidelines, there are no foreclosure charges on floating-rate loans, making transfers cost-effective.
What is the maximum car loan amount I can get?
Banks typically finance 80-90% of the car's on-road price for new cars and 70-80% for used cars. The exact amount depends on your income, existing obligations, and credit score.
Is car loan interest tax deductible?
Car loan interest is NOT tax deductible for personal use vehicles. However, if the car is used for business purposes and registered in the company's name, the interest may be claimed as a business expense.