Car Loan Options - Advanced EMI Scheme

Often referred to as easy monthly installments in the layman’s jargon, EMI stands for Equated Monthly Installment scheme wherein the buyer has to repay the entire loan amount in equated monthly installments. The buyer can opt for 100 per cent loan amount for the chosen car although he has to pay a minimum of five EMIs initially via post-dated cheques. The balance amount for the loan has to be paid through post-dated cheques for the decided period of loan repayment. There are certain advantages and disadvantages to this scheme. The benefits of opting for the Advanced Equated Monthly Installment scheme is that the buyer ends up giving a sizeable down payment in the form of the initial post-dated cheque payment, therefore reducing the total loan amount and hence also reducing the risk.

The bank/financer also stands to gain from this arrangement as the interest is usually higher in this scheme. Another drawback is that the EMI could possibly be on the high side since the interest charged by the bank for the repayment is calculated on the full loan amount unlike in the Margin Money Scheme. Repayment of the car loan usually takes place via post-dated cheques and generally there is no option to repay the full loan amount earlier than the period decided as the buyer is tied to the monthly payment scheme.