Down Payment Calculator

What is a Down Payment Calculator?

A down payment calculator is a financial tool that helps a buyer calculate the amount of money which is required to pay upfront for purchasing a house, car, etc. The down payment amount and other payment terms such as EMIs, processing fees, etc, are calculated based on various factors such as the cost of the asset, the percentage of down payment, the interest rate, processing fees, and the tenure of the loan. By combining all these factors, the down payment calculator gives you a clear picture of how much you need to pay as a down payment, processing fees and EMIs.

How Can a Down Payment Calculator Help You?

The down payment calculator helps an individual assess the amount of down payment in the following manner:
1. Budgeting: This calculator helps you in planning your budget by showing the exact amount which is required as down payment, processing fees, and EMIs at the time of making purchases.

2. Affordability: Using this calculator and by changing the input values, one can see the down payment amount which they need to make for purchasing a car, bike, etc.

3. Decision Making: Real-time calculation of the down payment calculator helps an individual in making an informed decision.

4. EMI Amount: This calculator also helps you in calculating the monthly payments that need to be made to pay off the loan.

How Does a Down Payment Calculator Work?

A down payment calculator helps an individual calculate the down payment amount required for big purchases. Here is an explanation of how it works:

1. Input Data: The first step in calculating the down payment of the loan is to input the data, such as the cost of the asset, the loan tenure, the interest rate, and processing fees, etc.

2. Implementing Formula: The next step is the application of the formula to calculate the down payment of the loan based on the input provided earlier.

3. Final Result: As soon as the formula is applied successfully, you will get the desired result in the form of the total down payment to be made.

Formula for Calculator Down Payment Calculation

The formula to calculate the down payment requires various steps, which are as follows:

1. The down payment is calculated as a percentage of the total asset value. Hence, the formula to calculate the same will be:
Down payment amount = Total Cost of Asset * Down payment Percentage

2. The final loan amount will be calculated by deducting the down payment from the total asset value.
Final Loan Amount = Total Cost of Asset – Down Payment

3. The processing fees are calculated as a percentage of the final loan amount.
Processing Fee = Final Loan Amount * Processing Fee Percentage

4. Cash needed for upfront payment of down payment and processing fees

Cash Needed = Down Payment Amount + Processing Fee

5. The last step would be calculating the monthly payment.

Monthly payment (EMI) = (P * R * (1 + R) ^ N) / ((1 + R) ^ N – 1)

Where:

• EMI: Equated Monthly Installment
• P: Principal Amount of Loan
• R: Interest Rate of Loan
• N: Number of Monthly Instalments

Example of Down Payment Calculation

Let’s understand the down payment calculator with an example:

Mr. A decided to purchase a car worth ₹10,00,000, and he approached a bank that offered them a loan for the same amount. However, Mr. A wished to make a down payment of 15% of the car value. The processing fees charged by the bank will be 3%, the interest on the loan is 13.6%, and the tenure of the loan is 10 years.

Now let’s calculate the down payment and EMI which is required to be paid by Mr. A.

Total Cost of Asset = ₹10,00,000
Down payment Percentage = 15%

• Down payment amount = Total Cost of Asset * Down payment Percentage
  = ₹10,00,000 * 15%

= ₹1,50,000

• Final Loan Amount = Cost of Asset – Down payment

= ₹10,00,000 – ₹1,50,000

= ₹8,50,000

• Processing Fee = Final Loan Amount * Percentage of Processing Fee

= ₹8,50,000 * 3%

= ₹25,500

• Cash Needed = Down Payment Amount + Processing Fee

= ₹1,50,000 + ₹25,500

= ₹1,75,500

• EMI Calculation = (P * R * (1 + R) ^ N) / ((1 + R) ^ N – 1)

Principal Amount of Loan: ₹8,50,000

Interest Rate of Loan: 13.6% P.A. 

Loan Tenure: 5 Years

• Converting the annual interest rate of the loan into monthly interest – 13.6%/12 = 1.13333%
• Converting the Yearly Loan Tenure into months – 10 years * 12 months = 120 Months

Using the Formula of EMI and putting the values in it.

EMI = (P * R * (1 + R) ^ N) / ((1 + R) ^ N – 1)

= (8,50,000 * 0.0113333 * (1 + 0.0113333) ^ 120) / ((1 + 0.0113333) ^ 120 – 1)

= ₹12,994

Therefore, Mr. A has to pay a processing fee of INR 25,500, whereas he has to arrange a down payment of INR 1,75,500, which includes the processing fee and down payment, and he also needs to pay a monthly EMI of INR 12,994.

How to Use the Pocketful Down Payment Calculator?

One can easily use the Pocketful Down Payment calculator to calculate their down payment on purchases by following the steps mentioned:

1. Enter the input details such as loan tenure, down payment percentage, total cost of asset, interest rate, processing fee, etc.
2. As you enter the details, the down payment calculator instantly calculates the down payment, and will show you the result in the form of down payment, loan amount, processing fees, monthly payment and cash needed for down payment and processing fees.
3. Adjust the input values to compare loan terms of different lenders and choose the best loan provider.

Benefits of Using the Down Payment Calculator

The major benefits of using the down payment calculator are as follows:

1. Informed Decision: The down payment amount will help a buyer in making an informed decision regarding their purchases, as to whether they are financially ready to purchase the asset or not.
2. Amount Required: It helps you in determining the amount which is required to pay as a down payment, based on the asset, and gives you an idea of how much savings are required.
3. Convenient: This calculator helps you save time and effort, as it easily calculates complex calculations.
4. Comparison: It also helps a buyer in comparing the prices and down payment required for purchasing different assets easily.