According to The Economic Times, home loan EMIs are calculated using the reducing balance method formula: EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], where P = Principal loan amount, r = Monthly interest rate (annual rate ÷ 12), and n = Total number of monthly instalments. This method ensures that interest decreases as the principal falls over the loan tenure. Similarly, car loan EMIs are calculated using the formula: EMI = P × R × (1+R)^N ÷ [(1+R)^N−1], where P = Principal amount, R = Rate of interest, and N = Number of monthly installments. The principal amount includes the car's on-road price minus any down payment, while RTO charges and insurance costs are typically included in the down payment calculation.
According to Zee Business experts Satyam Kumar (CEO of LoanTap) and Harsh Roongta (Founder of Fee Only Investment Advisers), borrowers should maintain their EMI at around 40% of household net monthly income, plus or minus 5 percentage points. Kumar emphasized that the EMI should be manageable without forcing the borrower to compromise heavily on other essential expenses, ensuring they can continue meeting expenses such as food, travel and medical emergencies without excessive financial stress. For loan tenure, experts recommend choosing the longest tenure possible that keeps the EMI manageable, with Roongta noting that a 35-year-old salaried borrower may be able to get a tenure of around 25 years, while self-employed borrowers should consider tenure based on the difference between their current age and 65 years. The experts also highlighted that borrowers should retain ₹8-10 lakh of free cash flow for post-purchase expenses, as many borrowers end up taking personal loans for such costs.
As reported by The Economic Times, loan amortisation shows how EMIs gradually repay both principal and interest components. Prepayment strategies can significantly reduce total interest costs, with one-time prepayments of ₹2 lakh on a ₹30 lakh loan at 8.5% p.a. with 19 years remaining potentially saving substantial interest. For car loans, part prepayment of up to 25% of the principal outstanding amount is typically accepted by banks, with charges varying by EMI due date - HDFC charges 5% on part payment within 13-24 months and 3% after 24 months from the first EMI. Lenders typically offer two prepayment options: minimising total borrowing cost by reducing tenure or maintaining monthly cash flow by reducing EMIs. Zee Business experts highlighted home-loan products such as MaxGain, Home Saver and Home Credit that allow borrowers to park surplus funds against the loan without paying interest on the parked amount.
According to The Economic Times, car loan tenures typically range from 1 to 5 years, with some lenders like HDFC Bank, Axis Bank, and ICICI Bank offering up to 7 years. Interest rates for car loans generally vary from 8.75% to 11.50% per annum, with longer tenures resulting in lower EMIs but higher total interest costs. For home loans, repo rate changes of 0.25% can impact floating rate loans, with rates potentially falling by the same amount on eligible loans. The minimum down payment for car loans is typically 10% of the on-road price, covering RTO charges and insurance costs, though some lenders may offer 100% financing for eligible customers. Zee Business experts noted that 99.9% of home loans are on floating rates, with products marketed as fixed-rate often fixed only for limited periods before becoming floating.
Bajaj Finserv announced a twelve percent rise in net profit for the first quarter, with revenue from operations increasing nineteen percent year-on-year. Interest income saw a rise of over eighteen percent during the same period, reflecting strong performance in the initial quarter of fiscal year 2027. These positive financial results pushed the company's shares higher by more than five percent, demonstrating investor confidence in the company's growth trajectory. The strong quarterly performance highlights the robust demand for financial services and the company's ability to capitalise on market opportunities.
