Auto Loan Calculator With Amortization Table

Amortization Formulas:

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

Monthly Payment:

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1. What is an Auto Loan Amortization Table?

An auto loan amortization table shows the breakdown of each payment into interest and principal components, along with the remaining loan balance after each payment. It helps borrowers understand how much of each payment goes toward reducing the loan principal versus paying interest.

2. How Does the Calculator Work?

The calculator uses the following 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: Early payments consist mostly of interest, while later payments apply more toward the principal.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see the true cost of their loan and how extra payments can reduce total interest paid and shorten the loan term.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: How can I pay less interest overall?
A: Making extra principal payments reduces the outstanding balance faster, which reduces total interest paid.

Q3: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs for a more complete cost picture.

Q4: Does a longer loan term mean I pay more interest?
A: Yes, while monthly payments are lower with longer terms, you pay more interest over the life of the loan.

Q5: Can I change my payment frequency?
A: Some lenders allow biweekly payments (half the monthly amount every 2 weeks), which results in one extra payment per year.