Considering purchasing a new car? Can you
afford it?
To help you find out if
you can afford a new car purchase, it is always a good idea to calculate car
loan repayments. You can easily do this by using repayments calculator
applications available throughout the web.
Understanding how your loan is distributed will help you determine
payments going to be made for interest and payments going to be paid to your
principal based on your monthly payment.
These loans are known as amortizing loans. This implies that the
mathematical geniuses at the bank or any other financial institutions worked
hard to come up with a fair computation so that you can pay a predetermined
amount every month and at the conclusion of your loan term. The computation
will have allowed you to pay the interest and the principal.How to calculate
car loan repayments?
1. Determine
the values necessary to calculate loan repayments.
There are three factors to consider when calculating your repayment through
loan repayment calculator:
The annual interest rate
the term or number of payments in months and the loan principal 2. Compute for your
monthly interest rate. Using the formula interest rate per annum divide by your
number of payments for a year, multiply by your loan principal is your monthly
interest rate. Here is the formula in determining the interest of the loan each
month. (Interest rate / number of payments) x loan principal = interest
Example: If you have a car loan of $30,000 with an annual interest rate of 6%
payable in 6 years: (6% / 12 months) x $30,000 = $150 interest for the first
month or $30,000 x .06 = $1,800 interest per annum. $1,800 divided by 12 = $180
interest Here is the formula in determining the interest of the loan each
month. (Interest rate / number of payments) x loan principal = interest Example:
If you have a car loan of $30,000 with an annual interest rate of 6% payable in
6 years: (6% / 12 months) x $30,000 = $150 interest for the first month or $30,000
x .06 = $1,800 interest per annum. $1,800 divided by 12 = $180 interest
3. Calculate
your new balance for the succeeding months of payment. Because
you have already started paying your principal, your succeeding months’
interest will change. To find out your new balance, your repayment plan minus
the first-month interest, deduct this from your principal is your new balance.
Use a loan calculator
app to come up with an estimate of your monthly repayments. In the same
example, a car loan of $30,000 with an annual interest rate of 6% payable in 6
years, your monthly repayment is $532. $30,000 - (532-150) = $29,618 Or $532
monthly repayment - $150 interest for the first month = $382 paid for principal
$30,000 - $382 = $29,618 new balance. Use a loan calculator app
to come up with an estimate of your monthly repayments. In the same example, a
car loan of $30,000 with an annual interest rate of 6% payable in 6 years, your
monthly repayment is $532. $30,000 - (532-150) = $29,618
Or $532 monthly repayment - $150 interest for the first month = $382
paid for principal $30,000 - $382 = $29,618 new balance. 4. Calculate your
next month interest using the new balance (6% / 12 months) x
$29,618 = $148 interest for the second month
5. Create a
table to see your development in payments for interest and payments for loans. Your
table will look like this, but computed until the end of your term. For 6
years, your table should show for 72 months.
|
Month
|
Starting
balance
|
Repayment
|
Interest
paid
|
Principal
paid
|
New
balance
|
|
1
|
$30,000
|
532
|
150
|
382
|
29, 618
|
|
2
|
29, 618
|
532
|
148.09
|
383.91
|
29, 234.09
|
Your calculation versus the bank’s calculation will show some
discrepancies. Ask your bank how they came up with the final computation to
better understand where you are at with your loan. A loan specialist can also
help you understand and come up with a more accurate figure in the even that
you would want to determine how much you’ll need for future loan repayments.
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