Car Loan Tips: Buying a car is not easy. It costs a lot of money. Now not everyone has a lump sum to buy a car. Therefore, most people take loans to buy cars. Now it is also necessary to repay the loan taken. For this, the EMI of the loan is made, that is, the loan is paid in the form of installment every month. Now if a person does not take care while taking a car loan, then he can get upset while paying the loan taken. Therefore, today we are going to tell you about the 20-10-4 formula. This formula proves to be of great use to those who take a car loan. Keeping this formula in mind, people taking car loans easily repay EMI of the month.
What does the 20-10-4 formula say?
The 20-10-4 formula states that to buy a vehicle, pay 20% of its on-road price down and take the remaining amount loan. While taking the loan, keep in mind that its EMI should not exceed 10% of your monthly income and the loan should have a maximum of four years. That is, 20 in the 20-10-4 formula means – 20% down payment ( on-road price ), 10 means – 10% of monthly income% EMI and 4 means a loan period of four years.
According to this formula, if you buy a car, there will not be much burden of loan. You will be able to finish the car loan easily. However, if you increase the down payment by 20 per cent, then you will be more comfortable in paying the loan. Therefore, try to keep as much down payment as possible from 20 per cent ( on-road price ), so that the loan amount can be reduced and EMI can also remain low.