1. What is the Auto Loan Extra Payment Calculator?

This calculator estimates how making extra payments on your auto loan can save you money on interest and shorten your loan term. It's based on Bankrate's methodology for calculating loan amortization with additional payments.

2. How Does the Calculator Work?

The calculator uses standard loan amortization formulas:

Where:

• \( Interest_k \) — Interest portion of payment in month k
• \( Principal_k \) — Principal portion of payment in month k
• \( Balance_k \) — Remaining balance after month k
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( PMT \) — Regular monthly payment amount
• \( extra \) — Additional payment amount

Explanation: Extra payments are applied directly to principal, reducing future interest calculations and accelerating payoff.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce total interest paid and shorten your loan term. This calculator helps visualize those savings.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, term, and any planned extra payments. The calculator will show your potential savings in interest and time.

5. Frequently Asked Questions (FAQ)

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

Q2: Are there prepayment penalties?
A: Most auto loans don't have prepayment penalties, but check your loan agreement to be sure.

Q3: Should I pay extra or invest instead?
A: If your loan rate is higher than expected investment returns, paying extra usually makes more financial sense.

Q4: How are extra payments applied?
A: Lenders typically apply extra payments to principal after paying the current month's interest.

Q5: Can I make lump sum payments?
A: Yes, lump sum payments work similarly to regular extra payments but provide more immediate principal reduction.