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Bankrate Auto Loan Calculator Extra Payment Monthly

Amortization Formula:

\[ \text{Interest}_k = \text{Balance}_{k-1} \times r \] \[ \text{Principal}_k = \text{PMT} + \text{extra} - \text{Interest}_k \] \[ \text{Balance}_k = \text{Balance}_{k-1} - \text{Principal}_k \]

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1. What is the Auto Loan Calculator?

This calculator shows how making extra payments on your auto loan can save you money and shorten your loan term. It uses standard amortization formulas to calculate the impact of additional principal payments.

2. How Does the Calculator Work?

The calculator uses these formulas:

\[ \text{Interest}_k = \text{Balance}_{k-1} \times r \] \[ \text{Principal}_k = \text{PMT} + \text{extra} - \text{Interest}_k \] \[ \text{Balance}_k = \text{Balance}_{k-1} - \text{Principal}_k \]

Where:

Explanation: Extra payments reduce the principal faster, which reduces the amount of interest paid over the life of the loan.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce total interest and shorten the loan term. The earlier you make extra payments, the greater the impact.

4. Using the Calculator

Tips: Enter loan amount, interest rate, and term. Add any planned extra monthly payment to see how it affects your loan.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Savings depend on loan amount, rate, and extra payment amount. Even $50/month can save thousands over the loan term.

Q2: Should I pay extra principal or invest?
A: Compare your loan interest rate to expected investment returns. Paying off high-interest debt often provides better guaranteed returns.

Q3: Are there prepayment penalties?
A: Most auto loans don't have prepayment penalties, but check your loan agreement to be sure.

Q4: How do extra payments affect amortization?
A: Extra payments reduce principal faster, causing subsequent payments to have a higher principal portion and lower interest portion.

Q5: Can I make lump sum payments instead?
A: Yes, lump sum payments have similar effects to regular extra payments, applied immediately to principal.

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