1. What is the Car Loan Payment Formula?

The car loan payment formula calculates the fixed monthly payment (PMT) required to repay a loan over a specified term. The formula accounts for the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Extra Payments: The calculator also shows the impact of making additional monthly payments toward the principal.

3. Importance of Extra Payments

Details: Making extra payments reduces the principal faster, decreasing total interest paid and shortening the loan term. Even small additional amounts can lead to significant savings.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, loan term in months, and optional extra payment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my loan?
A: Extra payments reduce principal faster, saving interest and shortening the loan term. The savings compound over time.

Q2: What's better: extra payments or shorter term?
A: Mathematically similar, but extra payments offer flexibility. Shorter terms often have lower rates but require higher minimum payments.

Q3: How much can I save with extra payments?
A: Savings depend on loan amount, rate, and extra payment size. This calculator shows exact savings for your scenario.

Q4: Should I pay extra at beginning or end?
A: Extra payments have most impact early in the loan when interest charges are highest.

Q5: Are there prepayment penalties?
A: Most auto loans don't have prepayment penalties, but check your loan agreement to be sure.