Auto Loan Amortization Calculator Bankrate Car Loan

Amortization Formula:

\[ Interest_k = Balance_{k-1} \times r \] \[ Principal_k = PMT - Interest_k \] \[ Balance_k = Balance_{k-1} - Principal_k \]

Monthly Payment:

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1. What is Auto Loan Amortization?

Auto loan amortization is the process of paying off a car loan with regular payments over time. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the standard amortization formulas:

\[ Interest_k = Balance_{k-1} \times r \] \[ Principal_k = PMT - Interest_k \] \[ Balance_k = Balance_{k-1} - Principal_k \]

Where:

\( Interest_k \) — Interest portion of payment k
\( Principal_k \) — Principal portion of payment k
\( Balance_k \) — Remaining balance after payment k
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( PMT \) — Fixed monthly payment amount

Explanation: The schedule shows how each payment is split between interest and principal, and how the loan balance decreases over time.

3. Importance of Amortization Schedule

Details: Understanding your amortization schedule helps you see the true cost of your loan, how much interest you'll pay over time, and how extra payments can reduce your total interest.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and loan term in years. The calculator will show your monthly payment and complete amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: This is how amortization works - interest is calculated on the current balance, which is highest at the beginning of the loan.

Q2: How can I pay less interest overall?
A: Make extra principal payments, choose a shorter loan term, or negotiate a lower interest rate.

Q3: What's the difference between simple interest and precomputed interest?
A: Simple interest (used here) calculates interest on the current balance. Precomputed interest calculates total interest upfront.

Q4: Does this calculator account for taxes and fees?
A: No, it calculates principal and interest only. Your actual payment may include taxes, fees, and insurance.

Q5: How accurate is this calculator?
A: It provides standard amortization calculations. Your lender may use slightly different rounding methods.