1. What is a Car Loan Amortization Calculator?

This calculator shows how your car loan payments are divided between principal and interest over time, and how making extra principal payments can save you money and shorten your loan term.

2. How Does the Calculator Work?

The calculator uses the standard loan amortization formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months in loan term

Explanation: The formula calculates the fixed monthly payment required to fully pay off the loan over its term, including interest.

3. Importance of Extra Principal Payments

Details: Making extra principal payments reduces your loan balance faster, saving interest costs and potentially shortening your loan term. Even small additional amounts can make a significant difference over time.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (typically 5-7% for car loans), loan term in months, and any extra principal you plan to pay each month. The calculator will show your amortization schedule and total interest savings.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even $50-100 extra per month can save hundreds or thousands in interest and shorten your loan by months or years.

Q2: Should I refinance or make extra payments?
A: If your rate is high, refinancing might help. If your rate is good, extra payments may be better as they directly reduce principal.

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

Q4: How does amortization work?
A: Early payments are mostly interest; later payments are mostly principal. Extra payments go entirely toward principal.

Q5: What's better - shorter term or extra payments?
A: Shorter terms usually have lower rates but higher required payments. Extra payments on a longer term offer more flexibility.