Buying a car in India is not just a dream, but a need. However, due to wrong financial planning, people get stuck in expensive EMI and long loan tenure, affecting their economic stability.

If you want to buy a new car burdened without a debt burden, then the 20x4x10 formula can be the best strategy for you. This simple but highly effective way helps you take the right loan and repay it in easy installments.

What is 20x4x10 Formula?

This formula is based on three important factors, which help you to make a balanced car loan plan.

20% Down Payment – Make at least 20% down payment of the total price of the car.
4 -year loan Tenure – Make a plan to repay the loan in a maximum of 4 years (48 months).
EMI less than 10% – EMI should not be more than 10% of your monthly salary.

This formula will save you from paying more interest and will strengthen your financial planning.

How does 20x4x10 formula work?

For example, if you want to buy a car worth ₹ 10 lakh, according to this formula:

• You should make at least ₹ 2 lakh (20%) down payment.
• A loan of ₹ 8 lakh should be taken for only 4 years so that interest has to be reduced.
• If your monthly salary is ₹ 50,000, EMI should not exceed ₹ 5,000.

Meaning: If your EMI is low, then you will be able to meet other financial needs and will be free from the debt burden quickly.

What are the benefits of this formula?

Interest savings – Low loan tenure means that you have to pay less interest.
Financial balance will remain – If EMI is low, then your budgeting will be done correctly.
The loan will end soon – Keeping more down payment will end the loan quickly and you will not pay unnecessary interest.
Money will be saved for other investment – If EMI is less than 10% of your salary, then you can invest money elsewhere.

Result: You can easily buy your favorite car without more economic pressure!

Should you follow the 20x4x10 formula?

If your income is stable and you want to take a car loan in a smart way, then this formula is a great option for you.

This formula is best for those people:

• Those who want to repay the loan at a low interest rate.
• Who do not want to get caught in debt for a long time.
• Who does not want to give a large part of his salary in EMI.

So if you are also thinking of buying a new car, then adopt this smart formula and avoid unnecessary interest!

Bonus Tips: What are the things to keep in mind while taking a car loan?

Choose a bank with the least interest rate.
Understand processing fees and other hidden charges.
Compare the financeing plans given by the bank.
Pay your EMI on time so that the credit score remains good.
Check the pre-payment and forechloser charges.

Compare bank and NBFC (non-banking financial companies) for the best deal and then choose the correct option.