Buying our dream car is an important milestone in everyone’s lives. A vast majority of us allocate a part of our monthly savings towards this goal. Car down payments do form a considerable part of the ‘Dream Car’ project and the higher the down payment, the better the car loan terms you can avail. 

Most of us have to go for a car loan to buy a car. So it is important to understand the best practices to follow if you want a cheaper and affordable car loan. If you plan carefully, you can get a car loan at low interest rates and affordable EMIs. 

Once you have secured the car loan and start making payments, if you ever feel a pinch with the monthly EMIs, it is time to talk to your lender and make a few changes to your loan structure to better manage your loan. 

Here are some Simple & Smart Measures to Lower your car loan EMI

1. Talk To Your Banker

The first best option is to talk to your banker. Your banker can give you a lot of options with loan management. They can offer you a lower EMI without refinancing or restructuring your loan. They might also agree to reduce some other charges like processing fees, administration charges or other charges associated with the loan. So, it is never bad to ask your banker for a few favours if you want an advantageous repayment for your car loan. 

2. Opt For Refinancing

If you feel that your car loan EMIs are over-burdening you, you should opt for refinancing your loan. Loan refinancing can get you a longer repayment tenure and lower interest rate resulting in a lower EMI. But keep in mind that longer repayment tenures will result in a higher overall cost of repayment. You may end up paying a very high amount than what you originally borrowed. Weigh in the pros and cons of loan refinancing carefully before you opt for it. 

3. Make Prepayments

If you have surplus cash in hand, pay that into your car loan account. This will allow you to negotiate with your banker and lower the monthly EMI. Most bankers allow part payments after a certain period of time. Take advantage of this and deposit whatever little surplus money you have. This will be a huge help to you in reducing the interest expenditure. You could eventually pay off the loan well in advance. 

4. Request For Extending Your Repayment Tenure

This is another option available for car loan borrowers. If you find it difficult to meet your monthly EMI commitments, you can request your banker to increase your repayment tenure by a few months or years. This will reduce your monthly EMI outflow. You will be comfortable making the payments so that you won’t default on the payments. Defaulting on payments is not a good thing and will have adverse effects on your credit score and future borrowing prospects. 

5. Check Out Balance Transfer Options

If your lender does not offer any conducive solution, explore available balance transfer options. Balance transfer will get you a lower interest rate and extended repayment tenure. Many lenders even offer interest-free repayments for a few months which will save you a considerable amount on your loan. However, be cautious about processing fees and other related charges. If they are quite high, the whole exercise of balance transfer may prove futile. Get a clear picture of all the charges and fees associated with the balance transfer process. Get the amortization schedule and work out the advantages before you sign up for a balance transfer. 

How can I get the best rate on my car loan?

For many of us, a car loan is not the only liability. We may be servicing multiple loans and getting any kind of benefit or discount on our car loan is a huge plus. Though we have seen how we can reduce the car loan EMI at a later date, prudency is when you negotiate and get a cheaper interest rate and better terms on your car loan.

Here are some tips to get the best terms on your car loan: 
1. Negotiate with the dealer on the final price of the car: Before making the down payment, sit down and negotiate with the dealer for the best price. You need to drive a hard bargain if you want the best price for the car. When you get the price of the car down, your loan amount will subsequently be lower, allowing you to go for a lesser car loan amount. 
2. Go for a Higher Down Payment: Though you can get up to 90% of the car price as a loan, choose to pay a higher down payment to reduce the loan amount. A lower loan amount obviously means lower EMIs. It will also reduce your overall interest outflow. 
3. Compare car loan products from various banks and choose the ones that come with nil processing fees and other charges. There are many banks and NBFCs that offer car loans without any additional fees and charges. You should take advantage of them. 
4. Look for tie-ups between dealers and banks: Many dealers have tie-ups with leading banks and NBFCs to give car loans at cheap rates. Take advantage of such offers. 
A car loan is a long term commitment but the car itself is a depreciating asset. You won’t be able to recover much of your money when you sell it off. So ensure to get a loan that doesn’t make you pay an incredible lot than what you actually owe. 


  1. Can I reduce my EMI car loan?

Yes, you can reduce your car loan EMI; talk to your lender to negotiate a lower EMI and higher repayment tenure. You can make a higher down payment so that your loan amount is reduced and in turn, you get a lower EMI amount. You can go for refinancing or restructuring of loans or opt for a balance transfer. 

  1. Which bank is better for a car loan?

As per current market rates, SBI comes with the lowest interest rate of 7.70% p.a. 

  1. Is it better to reduce the EMI or tenure?

If you want to pay off the loan quicker, you should opt for a reduced tenure. When you go for EMI reduction, the tenure will be increased and you will end up paying more interest. 

  1. How to determine if my car repayment is very high?

Any repayment that is more than 30% of your monthly net income should be considered high. 

  1. What will happen if I pay more than my EMI?

When you make additional payments towards your loan, it will be counted against your principal amount. The interest component of the EMI shall be adjusted accordingly and your loan tenure will correspondingly come down.