How to Calculate Car Loan Repayments

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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.