Car Loan Prepayment Calculator in Excel [Download]

car loan emi prepayment

Car Loan Prepayment Calculator can help you to save car loan interest amount by making prepayments against car loan account. Prepayment or part payment is a way to reduce the outstanding balance on your car loan thus reducing the interest amount against your car loan. For example, a 5 year car loan can be reduced to 3 years loan by making prepayments which will help to save interest amount in Loan EMI over time.

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Let us understand Car Loan Prepayment in detail.

Car Loan Prepayment Calculator Video

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What is Car Loan Prepayment or Part payment

  • Car Loan Prepayment is a way to reduce the principal remaining balance
  • The interest amount in Loan EMI is calculated based on this principal amount remaining
  • If this principal amount is reduced, you’ll pay less interest amount based on the interest rate of car loan
  • For example, if your loan remaining balance is Rs. 3 Lakh and interest rate is 9%, with tenure of 3 years remaining, Loan EMI will be Rs. 9540 using Car Loan EMI Calculator and out of this EMI, below is the interest calculation
Interest Amount = Principal Amount remaining * monthly interest rate / 100
Interest Amount = Rs. 3 Lakh * 0.75% / 100
Interest Amount = Rs. 2250

  • As seen above, the interest amount depends on the principal amount remaining in your loan account
  • For this reason, you should be decreasing the the principal amount remaining to save interest amount
  • Prepayments can be made once you have enough amount saved to pay against your car loan account to close the loan before time

How to Save Car Loan Interest

You can easily save the car loan interest amount over the loan tenure by making prepayments or part payments

  • Prepayment is a way to reduce the principal remaining balance in your loan account
  • Once you have enough funds saved, you can pay the amount against car loan account to reduce the remaining balance
  • This will decrease the interest amount you need to pay every month via EMI
  • While making prepayments, you have the option to reduce EMI or tenure
  • It is best to reduce tenure while keeping the EMI same to save maximum interest amount in your car loan
  • Reducing tenure will help you to close the loan before time and save extra interest amount as compared to reducing EMI
  • Note that prepayments can be made with variable interest rate car loans

ALSO READ: Home Loan Prepayment to save Interest amount

Car Loan Prepayment Charges

Prepayment charges apply when your car loan is of fixed interest rate, which means if the interest rate at which you have taken car loan is fixed throughout the tenure, either you will not be allowed to make prepayments or there will be charges you need to pay.

This extra charge depends upon the remaining balance in your car loan account and tenure remaining.

Is prepayment good for a car loan?

Yes prepayment is good for car loan since you get 2 important benefits:

  • Close your Loan before time
  • Save interest amount in your car loan

Above benefits can help you achieve your other financial goals faster while you are debt free as far as your car loan is concerned.

Once car loan is closed, you can use the car loan EMI amount to invest via SIP and achieve other financial goals.

Is prepayment allowed in SBI car loan?

Yes prepayment of car loan is allowed in SBI with some extra charges you need to pay.

So yes, you ca close your loan before time in SBI by making prepayments.

Advantages of Prepaying Car Loan

Below are some advantages of prepaying the car loan:

  • Close your Car loan before time
  • Save interest amount in car loan
  • Focus on achieving other financial goals

Conclusion

So you can make car loan prepayments to save interest amount based on the remaining balance in your car loan account. This will also help you to close loan before time and achieve other financial goals with the help of mutual fund investments.

Prepayments can help you become debt free and focus on other life goals.

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