Car Loan Amortization Calculator With Extra Payments

Amortization Formula:

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

Loan Amount:

Interest Rate:

Loan Term:

years

Extra Monthly Payment:

Monthly Payment:

Total With Extra Payment:

Total Interest Paid:

Months Saved:

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1. What is a Car Loan Amortization Calculator?

The Car Loan Amortization Calculator with Extra Payments helps you understand how your car loan payments are applied to principal and interest over time, and how making extra payments can save you money and shorten your loan term.

2. How Does the Calculator Work?

The calculator uses the amortization formulas:

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

Where:

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

Explanation: Each payment is split between interest and principal, with the interest portion decreasing and principal portion increasing over time as the balance decreases.

3. Importance of Extra Payments

Details: Making extra payments directly reduces the principal balance, which reduces the total interest paid and can significantly shorten the loan term.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Optionally add an extra monthly payment amount to see how it affects your loan. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments save money?
A: Extra payments reduce the principal faster, which means less interest accumulates over the life of the loan.

Q2: Should I pay extra each month or make a lump sum payment?
A: Regular extra payments typically save more than a single lump sum because they reduce the principal earlier in the loan term.

Q3: Are there prepayment penalties on car loans?
A: Some loans have prepayment penalties - check your loan agreement before making extra payments.

Q4: How much can I save with extra payments?
A: Even small extra payments can save hundreds or thousands in interest and shorten your loan by months or years.

Q5: Should I pay extra or invest the money?
A: This depends on your interest rate and potential investment returns - compare the guaranteed return (your interest rate) with potential investment returns.