1. What is the Auto Loan Extra Payment Calculator?

This calculator shows how making extra payments on your auto loan can save you money and help you pay off your loan faster, following Dave Ramsey's debt reduction principles.

2. How Does the Calculator Work?

The calculator uses the amortization formulas:

Where:

• \( Interest_k \) — Interest portion of payment in period k
• \( Balance_{k-1} \) — Remaining balance from previous period
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( Principal_k \) — Principal portion of payment in period k
• \( PMT \) — Regular monthly payment amount
• \( extra \) — Additional principal payment

3. Benefits of Extra Payments

Details: Making extra payments reduces the principal faster, which decreases the total interest paid and shortens the loan term. Even small additional amounts can make a significant difference over time.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, and term. Add any extra payment you plan to make each month. The calculator will show your savings and how much sooner you'll pay off the loan.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Savings depend on your loan terms and extra payment amount. Even $20-50 extra per month can save hundreds in interest and months off your loan.

Q2: Should I specify extra payments go to principal?
A: Yes, always request extra payments be applied to principal to maximize savings.

Q3: Is it better to pay extra monthly or make lump sums?
A: Regular extra payments have the most impact, but any extra helps. Lump sums are great for bonuses or tax refunds.

Q4: Does this work for all auto loans?
A: Most conventional auto loans, but check your terms. Some loans have prepayment penalties (rare for auto loans).

Q5: What's Dave Ramsey's advice on car loans?
A: Ramsey recommends paying cash for cars when possible, but if you must finance, pay it off as quickly as possible with extra payments.