Car Loan Calculator Monthly Payment Payoff Schedule

Loan Amortization Formulas:

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

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1. What is a Car Loan Amortization Schedule?

A car loan amortization schedule shows the breakdown of each monthly payment into principal and interest components, and how the loan balance decreases over time. It helps borrowers understand how much of each payment goes toward paying down the loan versus paying interest.

2. How Does the Calculator Work?

The calculator uses standard loan amortization 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 for month k
\( Principal_k \) — Principal portion of payment for month k
\( Balance_k \) — Remaining balance after month k
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( PMT \) — Fixed monthly payment amount

Explanation: Each payment first covers the interest due on the outstanding balance, with the remainder applied to reduce the principal.

3. Understanding the Results

Details: Early in the loan, most of each payment goes toward interest. As the balance decreases, more of each payment is applied to principal.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: This is normal with amortizing loans. Since interest is calculated on the outstanding balance, and the balance is highest at the beginning, the interest portion is largest then.

Q2: How can I pay less interest overall?
A: Making extra principal payments or choosing a shorter loan term will reduce total interest paid.

Q3: What's the difference between APR and interest rate?
A: APR includes both interest rate and any loan fees, giving a more complete picture of borrowing costs.

Q4: Are there prepayment penalties?
A: Some loans charge fees for early payoff. Check your loan agreement for details.

Q5: How does refinancing affect amortization?
A: Refinancing resets the amortization schedule, typically extending the loan term unless you refinance to a shorter term.