What is pre-EMI and how does it apply to used car loans?

Pre-EMI is the interest you are paying on the portion of the loan disbursement before actually starting your EMI payments. In used car loans, this is usually only relevant when your total loan amount is disbursed in stages or there is a delay in the delivery of the car or the car and registrations. During the pre-EMI payments, you are simply paying the interest over the portion that is disbursed - no principal payments. Once the complete loan has been disbursed and the car has been delivered or registered in your name, you will then make your full EMI payments that comprise both principal and interest. Pre-EMI can give you cash flow options while you are waiting for your car to be ready, but you have to pay interest before you officially start the tenure of the loan.

Pre-EMI can be convenient when you are managing other financial obligations or waiting on your car delivery but keep in mind that by only paying interest, you are not reducing your principal at any stage. Over time you may also pay more money in total interest compared to starting with full EMIs immediately. You should also always ask your lender how long the pre-EMI will last, and will you have the option to start full EMI payments sooner than the pre-EMI term. In addition, make sure to use a pre-EMI calculator to understand your total costs and this will help you plan your finances around the loan process.