How to Calculate Car Loan EMI Manually

Two weeks back, Mr. Arshad was keen to buy a car. After contacting several car dealers, he was able to hitch a ride. The cost of the car was Rs. 5, 35,067, and he was sanctioned a loan of 4 lacs. The remaining amount was paid as downpayment by him.

Mr. Arshad secured this car loan at a discounted rate of 11.25%, and for tenure of 3 years. He had to pay processing fees of Rs. 4350 along with the taxes. He had to pay an EMI of Rs. 13,021 monthly. However, Mr. Arshad was feeling that he was paying more. Like Mr Arshad, many of you may be thinking that their car loan EMI is much higher. There are not convinced by the results of EMI calculator, and prefer crunch the numbers manually.

If you doubt about your EMI amount, then follow these 2 methods, which will help you to calculate the EMI manually. The first method requires you to possess a computer and a spreadsheet program while the second method demands a paper and pencil along with simple mathematical skills.

Method with Excel:

The function used for calculating EMI in Excel is PMT. This function requires three variables, which are rate or interest rate of loan, nper or the loan tenure in months, and pv or present value of the loan. The formula is

EMI = PMT (rate, nper, pv), where rate is always in decimals.(eg: 11% = 0.11)

In Mr. Arshad’s Case, the EMI was PMT (0.1125/12, 36, 400000) = 13020.82374.

Method with Manual Calculation:

For those of you, who are not comfortable with Excel, switch to the basics of Mathematics. The interest charged is compound interest, and EMI is calculated from the overall amount. The formula for EMI is

EMI = [P x R x (1+R) N]/[(1+R)N-1], where P is the Principal amount, R is the rate and N is the loan tenure in months.

In Arshad’s Case,

EMI = [400000*11.25/100*(1+11.25/100)36]/[(1+11.25/100)36-1] = 13020.82.

By using these 2 methods, Mr. Arshad was convinced that he was paying the right amount. So, why not use it yourself and ward off all doubts regarding over-payment of EMI.

Floating Rate Home Loans are better than Fixed Rate Ones

The banking system in India permits borrowing of two kinds of loans. Fixed rate interest loans and floating rates interest loans. Recently, it has been observed that home buyers are inclined towards floating rate home loans, rather than fixed rate home loans. So, what makes these floating rate counterparts better than the fixed ones? How do these loans work? Do the EMIs for both the loans differ? How can they affect your monthly expense budget?

Fixed Interest Rate Loan:

The interest rate for these loans is fixed at the time of borrowing, and does not vary with the changing market conditions. Early EMI of this loan are used to cover up the interest while later EMIs are meant for covering the principal amount.

This loan is ideal for individuals who do not want their monthly budget to be disturbed by prevailing market conditions.

Floating Interest Rate Loan:

In this type of loan, the rate of interest is known to fluctuate according to the contemporary market conditions. The interest rate is calculated as the sum of fixed base rate and the floating factor. Generally, the base rate is expected to remain stable, while the floating factor varies with the condition of financial markets.

Differences:

Floating rates of interest are much lower than the fixed rates.  If a floating interest rate loan is available at 12%, then its fixed rate counterpart will be available at 15%. Even if tough market conditions arise, and the float rate is increased by 2.5%, still you will end up saving some money from your EMI amount. The rise in the floating rate is not fixed, and soon the rates will fall down back to original ones, or may be lower.

Floating rate interest loans help you to save money in the long run. Hence, they are becoming a favorite among home loan borrowers. 

Plan Your Home Loan with EMI Calculator

Every bird is seen returning to its nest, each evening. Like birds, you must be returning to your home, every evening. But, what if your home is rented, and you have to change it every time the contract ends?

Home is the place, where you relax and experience some finest moments in your life. Every piece of furniture in it, and every wall inside it, is known to carry a memory. Majority of you will be reluctant to drop the memories attached with home. So, why not opt a home, which will last with you for a lifetime?

For buying a home of your choice, you need ample amount of money. The prices of real estate are rising each day, and your savings may not be adequate enough for financing the purchase. For financing your home, you need to borrow a home loan. But before you jump into the deal, you need to decide some basic things like the amount of loan to borrowed, the loan tenure, the rate of interest, and the most important of all, EMI.

EMI of any loan is calculated by banking professionals. But, for making things easy and feasible, banks have started providing EMI calculators. An EMI Calculator is a web application hosted on bank’s website, and is useful to provide the quotes on loans. For instance, the calculator provided by HDFC is known to produce the installment amount, once you have entered the principal amount, tenure, and loan’s interest rate. You can use the sliders to alter any of these values easily.

On the same grounds, ICICI bank provides the loan installment calculator. However, you are required to open a few links before reaching it. The calculator provided by Union Bank is very simple. You are required to fill in all numbers, and a detailed result is available at end. Like these, there are many EMI calculators, which you are required to use, before borrowing a home loan.

How to Adjust Car Loan EMI in Your Monthly Budget?

You may be a child, or you may be an adult; the idea of owning a car will surely amuse you. However, the financing part of this luxury does put a toll on your monthly expenses. There are several cases, where people opt for car loans, but end up straining their monthly budget.

Before you decide to buy a car, make sure you check a few factors like budget, fuel economy, periodic maintenance cost, and the most important of all, the amount of loan EMI. Whenever you will opt for this luxury of owning a private set of wheels, you will need to make adjustments in the monthly expenses. 

For instance, your usable monthly income is Rs.50,000 and you have decided to buy a car in the range of Rs.5 lakh to Rs.6 Lakh. Initially, when you approach the car dealer, you will be asked to pay around 20% of total car amount in cash. For a car of 5 lakh, you are required to pay 1 lakh as down payment. Assuming that you pay1 lakh, you are now required to borrow a car loan of Rs. 4 lakh. Generally, companies like Magma Fincorp are known to charge 12% on car loans, along with some processing charge.

Based on the principal amount of 4 lakh, borrowed at 12% interest rate, you are required to pay Rs. 8898 as monthly installment. This figure is calculated for the maximum loan tenure of 5 years or 60 months. Apart from loan EMI, fuel expenses, tolls, and monthly maintenance will cost you around four thousand to five thousand. In this, you need to keep aside approximately Fifteen thousand every month for keeping the car.

So, before buying a car, you are required to adjust the calculated amount from your monthly expense budget. Only then it will be easy for you to enjoy the luxury of owning a car.

Loan Against Property or Personal Loan: Which one is Better?

Whether it is for residential or commercial property, there are plenty of ways by which people can arrange for the money. One of the most popular methods is by availing different types of loans; either a personal loan or a loan against property. So what are the main differences between these two types how do you know which one would be a better option?

Personal loans refer to those financing options which are granted for different personal uses and are generally unsecured. They are given based on the person’s integrity and ability to re-pay the bank or financial institution back.  They can be used for a variety of different purposes and there is no restriction on its usage.

On the other hand, a loan against property refers to those secured loans which are given or disbursed against the mortgage of property. They are taken for a variety of purposes; some of them being to expand one’s business, getting your son or daughter married, sending your son or daughter for higher studies abroad, funding a dream vacation or even can be used for funding medical treatments.

                             The main differences between the two are:

	Loan Against Property	Personal Loans
Purpose	They are taken by mortgaging the house property and are taken with some form of security.	They are taken for any personal purpose and are unsecured and have no guarantor.
Interest Rates	The rates of interest are usually between 12-16%, forming one of the cheapest retail loans.	The interest rates are higher and range between 16-21%
EMI Amount	As a result of the interest rate being lower, the EMI also turns out to be cheaper.	As a result of the rate of interest being higher, the EMI amounts too are high.
Loan Eligibility	The maximum loan eligibility is decided by the value of the income and property.	The maximum loan eligibility primarily is determined by the individual’s income level.
Loan Tenure	They have a maximum tenure of 15 years i.e. 180 months.	They have a maximum tenure of 5 years (i.e. 60 months)
Type of Loan	Secured	Unsecured

  

While a loan against property is considered to be one of the best ways to raise money there are also many disadvantages involved. If the borrower is unable to re-pay the loan back completely; either the financial institutions or bank can forfeit the property.

Housing Finance: Eligibility Criteria's Before Getting Home Loans in India

The real estate market in 2013 witnessed a number of challenges from high interest rates on housing loans and high property prices; to various other reasons such as the slowing of the economy, salary increments pared to the bare minimum and job losses mounting. There was thus a lower demand for housing, although many builders sought to woo customers with freebies, price discounts, schemes and high amount of bargaining. As a result the index price rose in 15 of the 20 cities that are covered by the NHB (National Housing Bank; i.e. the regulator and financier for the housing sector in India).

Although many different schemes and discounts were offered during the latter of 2013, many seeking home buyers did not respond to the offers as the head of research and Real Estate Intelligence Service of Jones Lang Lasalle India (a financial and professional services firm specializing in real estate services)had claimed that, "When prices are falling and you are getting a good deal, the psychology is to wait for an even better deal to come along". However, real estate prices are expected to correct in certain areas of the country during 2014.

Many home buyers rely on different home loans that are offered by different banks and financial institutions in the country so that they may purchase the house of their dreams. There are also many non-banking financial institutes which also offer these loans.

Furthermore, with the inflating prices of real estate in the country it is becoming increasingly difficult for an average middle class man to afford an apartment of his own; solely based on his own income. Of course, there are many other reasons such as buying a second property for investment purposes or as a vacation retreat.

However, there are many eligibility criteria's which a person has to meet before applying for such loans. Some of these factors include:

• Borrowing capacity: Aptly said "In order to get a loan, you need to prove you do not need it in the first place." One of the most important factors that banks take into consideration is whether you are capable of repaying the loan back to the bank.  Banks judge this by taking your monthly income into account (monthly net salary). Very often, the EMI would not exceed 40-50% of a person’s monthly income.

• Age: Age is one of the most important factors that banks pay attention to. It directly co-relates with the eligibility amount and banks often prefer customers to have 10-15 years on their side before retirement age.

• Existing loans and monthly outflows: Besides the other factors, further scrutiny of bank statements and one’s savings account help to reveal outflow towards any loans and a person’s monthly expenses. The amount of expenses should not be above 55-60 % of a person’s monthly income. If it is higher it reduces the loan eligibility.

There are many other factors such as monthly income, number of dependents, educational qualifications & relevant skill-sets, nature of business/profession or the type of industry that you work in, stability of income, whether there are any joint applicants and credit score which also play a major role. These factors may differ as per the lending institute providing the same.

Factors to take into Consideration When Availing Used Car Loans

When people usually think of buying a car, many of them would probably think of purchasing a second-hand or even a used-car; rather than a 'brand new one'. This is simple for the reason that it is less risky to drive a used car as opposed to a new car when you obtain a licence. Majority of the people who do, often seek financial aid when purchasing their first vehicle can rest assured that banks and financial institutions offer different financing options for the same. 

Applying for a car loan is often one of the preferred options by many car buyers, whether for new or used cars. Banks provide many different types of car loans; all offering different features. Besides this, there are also many car loan providers such as car dealerships which offer many different car loan options to people in India. Some of the different TYPES of loans include new car loans, pre-owned (used) car loan and a loan against car. Many of the car loan providers also offer different types of schemes for these loans. Some of them include margin money scheme, security deposit scheme, advance EMI scheme, lease financing purchase and hire purchase scheme. 

There are many different factors which need to be taken into consideration when availing for used car loans. Some of the factors include:

1) Model & Type of car: Banks and/or other financial institutions pay attention to the age of the vehicle, type and model before the issuance of the loan. It is always advisable to opt for a relatively newer model that is recently designed than an older version one.    

2) Total amount of car: Once the model of the car has been selected, it is very important to calculate how much money you are willing to put on the deal. Once this is calculated, you will have a good idea of how much loan you should take up.

3) Requirement: After you decide the loan amount that you require, it is very important to decide the tenure and the installments that will be paid either on a monthly or periodic basis. It is very important to take into consideration factors such as annual monthly income and even future predictions.  After this it becomes relatively easier to find sources for the loan that is required. 

4) Browse options: Most of the banks and financial institutions offer used car loans. It is very important to compare the loans that are offered by different banks as they will have different interest rates and different features. Some of these may include banks such as ICICI Bank, HDFC Bank, SBI bank or even institutions such as Magma Fincorp.

5) Necessary documents for verification: When availing these loans, various documents are required for the same. Authorization as well as attested proofs of the car purchase, income stability of the person (customer) and/or any other document that has been requested from the bank/financing institute. Only once these documents are submitted can a person avail the loan.