1. What is the Additional Payment Auto Loan Calculator?

This calculator determines how much you can save on your auto loan by making additional payments. It calculates the reduced balance (RB) that results from making extra payments of a specified amount.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( PMT \) — Additional payment amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( m \) — Number of remaining periods (months)
• \( RB \) — Effect on loan balance ($)

Explanation: The formula calculates the present value of a series of additional payments, showing how much they reduce your total loan balance.

3. Importance of Additional Payments

Details: Making extra payments on your auto loan can significantly reduce the total interest paid and shorten the loan term. Even small additional payments can have a substantial impact over time.

4. Using the Calculator

Tips: Enter your planned additional payment amount, the monthly interest rate (divide APR by 12), and the number of remaining payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with additional payments?
A: The savings depend on your loan terms and payment amount. This calculator shows the exact reduction in your loan balance from extra payments.

Q2: Should I make additional payments or invest the money?
A: This depends on your loan interest rate vs. potential investment returns. Paying down debt is a guaranteed return equal to your interest rate.

Q3: Are there prepayment penalties on auto loans?
A: Most auto loans don't have prepayment penalties, but check your loan agreement to be sure.

Q4: Is it better to make larger payments or more frequent payments?
A: Both strategies help, but making larger payments reduces principal faster, which has a bigger impact on total interest.

Q5: How do I apply additional payments to principal?
A: Contact your lender to ensure extra payments are applied to principal rather than future payments.