Indians have come a long way in the past couple of decades. The quality of life and spending power of the people has increased rapidly. But, still majority of the middle class families have to avail loans for buying various things such as a car or home, and even for education. The income gap in the nation has transformed loans into one of the best friends of middle class families. It helps them in buying things that require huge amount of cash and is sure to leave them financially crippled. But, with loans, people do not have to pay the entire amount up front; instead they have to pay a specific amount on a monthly basis to repay not just the loan but the interest as well. There are three major loans that people avail: car loan, home loan, and education loan.

Car loan and home loan in particular has become a staple for all families, even people who can afford to buy a car or house outright. The car loan interest rate provided by the lenders of the nation is affordable. On the other hand, the rising prices of the land and developers have compelled everyone to opt for home loan. But, one of the main questions is that both car and home are important things that you need. So, can you avail both car loan and home loan at the same time? Let’s find out:

Car Loan Vs. Home Loan

If you have ever availed a loan then you would know that managing just one loan can be very difficult, never mind two. But, that does not mean that you should not consider availing two loans simultaneously. However, you will need to plan your financial approach and roadmap meticulously, including your monthly expenses for the foreseeable future. The first thing that you should know is what impacts your car loan interest rate. The interest rate of your car loan is affected by a variety of factors that include the following:

  • Your credit Score
  • Your monthly or annual income
  • Your nature of employment
  • Your employer’s credentials
  • Your financial history and current status
  • The type of car that you wish to purchase
  • Tenure of the Loan

There are other factors that affect the car loan interest rate, but those factors are something that can be controlled.

So, one of the things you realize is that all the factors mentioned above are controllable by you. Secondly, you need to know what affects your EMI and how it is calculated. The EMIs of your loan are primarily affected by the rate of interest. But, they are also affected by the method that is used to calculate the EMI. While it is obviously easier to use a car loan calculator to determine the interest rate and EMIs, you should also know the method. The flat rate interest method is used for calculating the EMIs for a car loan. The flat rate interest method identifies only one principal amount i.e. the principal amount doesn’t change for the tenure of the loan.

The formula for calculating EMIs of car loan through flat rate interest method is:

EMI = (Principal + Interest)/Period in Months

Here, the interest is calculated by PRT/100 i.e. principal amount (P) multiplied by rate of interest per annum (R) multiplied by time in years (T) divided by 100.

Now, you know how to calculate EMIs for your car loan. But, you may be wondering why you would need to know about EMIs. The reason is that EMIs are crucial to management of your car loan. If you do intend to avail two loans simultaneously then you need to know how repayment of loans can be managed.

The tenure of a car loan is not as large as that of a home loan which makes it all the more important for you to manage EMIs and repayment perfectly. Determining the best EMI will also entail ascertaining the best tenure of the loan.

Is it a Good Idea to Avail Two Loans?

Whether or not you should avail two loans depends entirely on your situation. However, it is not impossible to manage repayment of two loans, especially car loan and home loan. The reason is that the tenure of car loans is way shorter compared to that of home loan. Additionally, there is a huge difference in the car loan interest rate and that of home loans.

Moreover, if you plan your EMIs perfectly by selecting the best tenure and interest rate, and do not miss repayments on both loans, then it is easily manageable. However, your credit score will be lower than normal once you avail two loans. But, if you continue making timely payments and repay your loan, then it is not a huge concern.


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It does not matter if you are buying a car or a home, or even aiming for higher education, all these things have one thing in common that is loan. Yes, you may need loan for a variety of things in addition to the three mentioned above. Additionally, sometimes you may need it urgently. Now, in such a situation, would you really want to go to a bank? The loan approval process of banks is riddled with bureaucracies and redundant steps that take up a lot of time in approving a loan. So, the next time you need a loan that does not exceed INR 2 Lakhs, download the PaySense mobile app. With PaySense, you can apply for the loan from the comfort of your home, and it will be approved instantly.