Using an Auto Loan Equated Monthly Installments (EMI) Calculator

When it comes to figuring out your vehicle financing, an auto loan EMI calculator can be very handy tool. Like any other tool, you have to know how to use it to make the most of it.

First, it’s important to define exactly what EMI is. The abbreviation EMI stands for Equated Monthly Installments, which is the total amount of a loan (loan principal and interest) divided by the number of months in the loan’s term. If you have your EMI, you know exactly what your payment will be if you figure it out correctly.

To make use of an auto loan EMI calculator, you have to start with three important pieces of information: the amount financed (or principal amount of the loan), the annual interest rate, and the term (or total number of monthly payments). It’s absolutely necessary that you have all three of these bits of information so your payments can be calculated correctly.

When your lender talks about the “price” of the car, he or she will generally include a down payment as part of the calculation. The down payment is a way to get the principal lower. The larger the down payment, the less you’ll end up having to finance. This is one reason the salesperson in a dealership (when you’re using dealership financing) may push you to pony up a larger down payment than you might otherwise have wanted to come up with. A larger down means a smaller loan, or it can also mean that you can buy a more expensive car.

Once you know how much you’re financing, you need to know your interest rate. This will affect the total amount you end up paying, because a larger rate means a larger interest amount tacked on to each of your monthly payments. The term also affects your payments, because a longer term (more months to pay) will lower the monthly amount and raise the overall amount of interest, while a shorter term will increase the monthly amount but lower the overall interest you’ll pay over the term of the loan. Because of the the way these numbers slide back and forth, people turn to an auto loan EMI calculator to help them sort out their auto financing picture.

It’s not absolutely necessary to use one of these calculators to figure out what your payments will be when you finance a car. While difficult, it is possible to calculate all of the numbers yourself. But why bother, when it’s so easy to do it online using a quick and easy tool? Arm yourself with the right information — the amount financed, your interest rate, and the number of months in the term — and an online auto loan EMI calculator will do it for you.

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