Car Finance - How to Decide Best Car Loan EMI - By: carazoocars0

Earlier, car buyers had be fully dependant on the loan officer. Thanks to the various options we have these days, the loan agents have to compete with each other for our car deals. We have the ‘pre-approved loan’ and ‘loan on phone’. Banks yearn for customers. This article will help car buyers get the best EMI on the car loan.

The car finance rates may be high. Yet, the car buyer is the one who gains. Negotiation is the best trick that one can play in the game of car financing. Brush up on your negotiation skills and you will be amazed at how the interest rate and car loan EMI decrease drastically. If a finance agent tells you that the rate and EMI are fixed, ask for the manager. You never know, the EMI may go down.

Do not forget to do your home work. Use the EMI calculators that are present on most car loan web sites. Calculate the EMI for the amount you would have to borrow as auto loan. Compare the EMIs from as many Web sites as you can. It is advisable to later lower down the choice to may be five car finance agents who offer the lowest interest rates and the lowest EMIs. Don’t be happy though, that you’ve got the best car loan deal. You need to negotiate on those interest rates. Even very little amount saved in margin down payment and interest counts. There are enough options available for an average Indian to obtain an auto loan on sensible terms as long as he knows what to ask for and assess what is being sold.

Suppose you take a car loan of Rs 1 lakh for a 3-year term and EMI of Rs. 3,331, the amount you would repay at the end of the three-year tenure would be Rs 1,19,916. The extra sum you would have repaid over the principal is Rs 19,916. On a yearly basis, the same works out to Rs. 6,638 or 6.6 per cent a year. This is the flat rate charged by the loan agency.

The reason the rate is so good is because it takes for granted the simple interest, which is not appropriate for our EMI based loan. The flat rate is applicable, if you are allowed to pay only the interest at the end of every year for three years and repay the principal after three years.

Most car loans come with monthly payments in the form of EMIs that include principal repayment and interest charges. Your principal outstanding decreases every month and the monthly interest is calculated on this reducing balance. See to it that you settle for the lowest EMI in order to get the best deal. However, do not forget the interest rate.

Today, car finance agents offer loan tenures as long as seven years that naturally lower the EMI. However, such car loans may not be optimal. You may end up constantly owing more on your car than it’s worth as your car is depreciating faster than you’re paying your loan off. You will not even be able to sell off your car midway without losing money. Then comes the pre-payment penalty too. You will be happier considering a cheaper car than a longer loan.

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