How to pick the ideal tenure for Car Loans?


Today, vehicles have become an essential part of our modern lifestyles. Owning a four-wheeler ensures comfort and easy mobility. However, purchasing a vehicle is one of the bigger economic decisions people need to make. Also, not everyone can afford it easily. While buying a used car can make the purchase more affordable, people may still not have the funds to buy such a car on short notice.

This is when you can finance the purchase by taking a Car Loan. Such a Loan lets you borrow funds from your preferred bank to buy a car. When you opt for this Loan, you agree to repay the Loan amount and interest within a specific date using equated monthly instalments. Such a Loan makes buying a car easier. However, when applying for the Loan, you need to be mindful of certain factors.

One such task is selecting a suitable repayment tenure for your Loan. Let’s understand how to choose the correct tenure.

Steps to choose the tenure

When choosing a repayment tenure for your New or 2nd Hand Car Loan, you may opt for a longer or shorter tenure. The choice usually depends on your current financial condition and repayment capabilities. When you pick a shorter term, you need to pay a higher EMI. On the other hand, selecting a longer term can keep your EMIs lower.

As evident, the tenure affects the EMIs you need to pay. Hence, evaluate how much you can allocate for EMIs every month when ensuring an ideal tenure. For this, consider the following:

  • Monthly surplus

Before you pick a tenure, understand your monthly surplus. To arrive at the figure, deduct your expenses from your net income. You should also subtract all outgoings, like EMIs on other Loans, Systematic Investment Plans for Mutual Funds, Insurance premiums, and more. After doing the calculations, you understand how much you are left with to pay for the Car Loan EMI.

  • Plans for prepayment

When applying for your Car Loan, you can choose the maximum tenure initially. Then, you can reduce the tenure by prepaying part of the Loan. However, before applying this prepayment strategy, determine the charges levied by your bank for prepayment.

  • Future cash flows

Besides knowing the monthly surplus to direct towards Car Loan EMIs, you need to understand if you would expect a salary hike soon. In such cases, you might be able to pay a higher EMI. If you want to make a big expense soon, you will want to lower your EMI and save for it.


When applying for a Car Loan to fund the purchase of a car, you need to choose the Loan repayment tenure carefully. When doing so, you can refer to these steps. They might help you find a suitable term that matches your current finances and repayment ability.