How high a Car Loan EMI can you afford?

Despite being a cheaper mode of transportation, people are preferring a private car over public transportation. Main reason for this transition can be attributed to public transports being a bit crowded and can at times get uncomfortable also. People are valuing their comfort and convenience, and that is exactly why owning a car is no more a status symbol, it is a necessity now. However, paying off your Car Loan can be turn out to be very tricky.

Here are some pointers on how you can stay on top of your Car Loan:


While mulling on the engine capacity, mileage, and colour can be fun, deal with the brass tacks first. Budget for the total expenditure before you select a car. Figure out how much you can afford to spend on the down payment, loan, maintenance, insurance, even fuel. Make a budget that you can set in stone. 

Down payment

Banks and financing agencies have enticing options with minimal down payments. However, it would be prudent to make a large down payment. The more you pay upfront, the smaller your loan amount and the lower the outflow on the interest component. Ideally, try to make a down payment that’s in the range of 20-25% of the total car value. 


Tied to your down payment are Equated Monthly Instalments (EMIs). Writing those cheques for years and years can be back-breaking if you haven’t figured what works best for you. Opting for a lower EMI may seem easier on the purse (or wallet), but it means having to pay for a longer duration, which in turn means a much higher interest payout.

Based on your income, calculate your monthly expenses across the board so you can figure how much you can put aside easily for your EMI. About 10-15% of your monthly income is ideal. If another family member is chipping in, you could push it to 25% of the combined income of all contributing members.

Interest rates

Dealerships have tie-ups with financing agencies, and although convenient, these offers may not be the most cost-effective. Do your homework and compare various offers from different banks. HDFC Bank offers attractive interest rates and it takes only a minute to check your eligibility and 30 minutes for a loan approval! 

Fine print 

Read and understand all the terms and conditions. If there are clauses such as penalty on pre-paying the loan or on missing an instalment deadline, you should know beforehand and be prepared for the same. These penalties can add up and become very expensive quickly. 

If the current Car Loan is not working for youscout around for a better deal. You may have the option of changing banks if you’re getting a sweeter deal on the remaining tenure elsewhere. HDFC Bank, for instance, offers flexible payment options and does not levy any foreclosure penalties.


Your goal should be to get rid of the debt as soon as possible and ensure that your credit score remains intact. So, avoid missing any EMIs. A late fee adds on to your interest burden and also stains your credit score. Remember to set up an auto-debit plan with your bank account and enable mobile alerts to ensure you are never short of funds.

Following these tips can make buying and owning a new car easy and stress-free. You can also try to lower your EMI rates. Click here, to know more

Looking to apply for a HDFC Bank Car Loan? Click here now!

* Terms & conditions apply. Car Loan disbursal at sole discretion of HDFC Bank Ltd. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.