Ways to Reduce Your Car Loan EMIs

Pradnya Ranpise Posted on August 11, 2025

6 Tips to Lower Car Loan EMIs

After browsing countless brands and their bestselling cars, you might have settled on one with the best mileage, features, etc. But, guess what? That mighty price tag could deal some damage after converting the payment into EMIs. However, there are a few ways to lower the price!

1. Pay a Higher Down Payment

While this step could topple some budgets, it may be worth the try. Consider that your EMI would be considerably reduced by paying a higher down payment. It would also lower the loan amount required. That said, since the interest of a loan is estimated based on the principal amount requested, it would benefit the borrower.

The more money you choose to borrow, the higher interest will be imposed on you. Hence, it’s best to pay a reasonable amount upfront to lower the burden of interest rates. It will help you reduce the EMI and cushion the blow of interest rates in the long run.

2. Choose Affordable Cars

If you have your heart set on a particular type of car, ensure it matches all the necessary criteria. Once it checks all the boxes of utility and safety, start negotiating the price with different car deals. While shopping for a car, it’s best to avoid settling for the first option or offer available. Mull over the decision as you let various car dealerships offer the most competitive prices in the market.

Moreover, with some negotiation, you just might get some free accessories! Unless it’s necessary, browse through all the options in the market before making the final purchase decision.

3. Opt for Long Tenures

When lenders offer various tenure options, experts suggest that borrowers could opt for the longest one available. It will distribute the EMI across the length of the tenure, reducing the EMI you need to pay each month. But, consider some factors before making this decision.

Choosing a longer term increases the duration within which you must continue paying the interest charged on the loan amount. In exchange for a lowered EMI and longer tenure, you might incur the additional expense of paying the interest. So, unless it’s a feasible option for your finances, borrowers must thoroughly contemplate before increasing the duration.

4. Approach Your Existing Bank

One of the best ways to ensure that you receive the choicest offers is by visiting one of your banks! Preferably choose a bank with which you have sustained the longest customer relationship. It will allow them to make better offers that work in your favour if you have maintained a healthy relationship with them. They may even offer you a car loan reducing interest rate based on your loyalty and financial profile.

5. Use Windfall for Prepayment

That Diwali bonus check can do more than just purchase a few idle gifts for the kids and relatives! With each windfall you receive, consider re-directing it towards the prepayment of the loan. While not necessary to entirely part with the amount, use a portion of it to repay the loan sooner.

Most banks and NBFCs allow borrowers to make prepayments after a certain period within the tenure. Borrowers can take advantage of this by using bonus checks or other windfalls to deposit the surplus toward loan repayment. It will allow you to close the loan well in advance, without the unnecessary interest payment. However, inquire with your loan provider whether they levy any prepayment charges. Depending on that, consider closing off the loan at the earliest.

6. Prioritise High-Interest Payments

Another way to quickly close a loan is to create a list of all ongoing repayments like high-interest credit cards, loans, etc. Prioritise them in high to low interest based on their interest rate. Once completed, start focusing on paying off high-interest loans like car loans first. It means re-directing any surplus checks or bonuses towards closing it off. Moreover, it means prioritising its timely repayment without any delays.

With these practical tips, managing your EMIs becomes easier—whether you're aiming to prepay faster or secure auto loans with low interest rates. Once the loan is closed, it’s all about smooth rides and fulfilling those long-awaited road trips.