How to Lower Car Loan EMI by Increasing Downpayment - Car Loan Blog - Tata Capital

Increase your Used Car Loan Downpayment to Reduce EMIs

Mar 06, 2017

When you are planning to buy a used car (or even a new car) on loan, you are generally worried about the EMI that is to be paid every month. Isn't it?

It's natural for you to think that lower is your EMI, more comfortable you will be.

But EMI cannot be decided by the lender as per your desires. There are few factors that are used to arrive at your final EMI. Some of these are loan amount, loan tenure, and interest rate.

Now it may not be possible for you to do much about the interest rates being charged by the lender. But you can always do something about the loan amount.

Most lenders want used car loan borrowers to bring atleast 10% of the cost of the car as downpayment.

Suppose you want to purchase a car of Rs 6 lac on loan. Now lender will only give you Rs 5.4 lac as loan and you need to bring in Rs 60,000 as downpayment.

For 4-year tenure and 15% rate of interest, your EMI will be about Rs 15,000.

Now you can reduce this EMI, if you are able to pay more down payments. So let's believe that you are able to give Rs 60,000 from your own savings. Also, your friends and family members are able to give you another Rs 90,000. So the total money that you have now is Rs 1.5 lac. This reduces your actual loan requirement to Rs 4.5 lac.

Let's see what impact it has on your EMI.

Your new EMI will be Rs 12,500.

So this is how you can reduce your EMI if you can bring in more downpayments.

A lower EMI is better if you don't want to strain your finances. But if you want to lower your EMI by increasing the tenure, remember that you will end up paying more on total interest over the course of loan.