EMIs are small monthly installments that have to be paid by the borrower while repayment of the loan. EMIs are decided on the loan amount, tenure of the loan and the interest rate that is applicable. For a 3 lakh car loan, the EMI will vary with the interest rate and the loan tenure.

For instance, if the rate of interest is 5%, then for a tenure of 5 years, the EMI will be Rs. 5,661. For an interest rate of 7% and tenure of 6 years, it will be 5115. Let us now see the two ways in which the EMI for a car loan can be calculated. 

How to use the EMI calculator?

  1. While using the EMI calculator the first step would be to select the loan amount that has to be entered.
  2. The second step would be to select the tenure of the loan
  3. Banks have an additional charge that is called the processing fee while providing loans.
  4. The next step would be to provide the interest rate and the processing fee as charged by the bank.
  5. After the calculate option is clicked, the result shows the EMI that has to be paid every month.

How is the EMI determined?

The EMI for any loan is calculated using a formula as given below

E= PXRX(1+R)^n/{(1+R)^n-1}

Here E = the EMI that has to be paid

 P stands for the principal amount

R is the rate of interest that is available

N is for the tenure of the car loan.

Here is a table showing charges and fees from top banks

Name of the bank

HDFC Bank Car loan

Axis Bank Car loan

Processing fee

1% of the loan amount. The maximum and minimum amounts that can be charged are Rs.5,000 and Rs.10,000, respectively.

Rs.3,500 to Rs.5,500



Rs.500 per instance

Foreclosure charges

3% - 6% depending on the amount of time completed*

5% of the principal outstanding

Loan cancellation

As mentioned by the bank

Rs.2,500 per instance

Penal interest

2% per month

2% per month