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Auto Loan Payoff Formula:
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The auto loan payoff calculation determines the remaining balance you would need to pay to completely satisfy your auto loan. This amount is different from simply multiplying your remaining payments because it accounts for the time value of money and interest.
The calculator uses the auto loan payoff formula:
Where:
Explanation: The formula calculates the present value of all remaining payments, accounting for the interest that would have been earned on each payment.
Details: Knowing your payoff amount is essential when considering early loan repayment, refinancing, or selling your vehicle. It helps you understand exactly how much you need to pay to clear the loan.
Tips: Enter your regular monthly payment amount, the monthly interest rate (divide your annual rate by 12), and the number of payments remaining. All values must be positive numbers.
Q1: Why is my payoff amount different from my remaining payments total?
A: The payoff amount accounts for the time value of money and interest savings from early repayment, while the simple total doesn't consider these factors.
Q2: Does this include any prepayment penalties?
A: No, this calculation doesn't account for potential prepayment penalties. Check your loan agreement for these details.
Q3: How often do payoff amounts change?
A: Payoff amounts typically change daily due to accruing interest. Most lenders provide a 10-day payoff quote that's valid for that period.
Q4: Why do I need to use the monthly interest rate?
A: Since payments are made monthly, the calculation requires the interest rate per payment period (monthly) rather than the annual rate.
Q5: Is this the same as my loan balance?
A: Your principal balance is different from the payoff amount. The payoff includes any accrued interest up to the payoff date.