1. What is the Car Loan Payment Formula?

The car loan payment formula calculates the fixed monthly payment required to repay a car loan over a specified term. It accounts for the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount (AED)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the fixed payment that covers both principal and interest each month.

3. UAE Salary Constraints

Details: In the UAE, banks typically limit car loan payments to a maximum of 20% of your monthly salary. This calculator checks affordability against this threshold.

4. Using the Calculator

Tips: Enter the loan amount in AED, annual interest rate (without % sign), loan term in years, and your monthly salary. The calculator will show the monthly payment and whether it's within UAE banking guidelines.

5. Frequently Asked Questions (FAQ)

Q1: What is the typical interest rate for car loans in UAE?
A: Rates vary but typically range from 2.5% to 4.5% for new cars and 5% to 8% for used cars, depending on the bank and your credit profile.

Q2: What is the maximum loan term in UAE?
A: Most banks offer terms up to 5 years for new cars and 3-4 years for used cars.

Q3: Can I get a loan if the payment exceeds 20% of my salary?
A: Some banks may make exceptions for customers with excellent credit or additional income sources, but 20% is the general rule.

Q4: Are there other fees I should consider?
A: Yes, most loans include processing fees (1-2% of loan amount), insurance, and possibly early settlement fees.

Q5: How can I reduce my monthly payment?
A: Consider a larger down payment, longer loan term (if available), or negotiating a lower interest rate.