Car Loan Amortization

Car loan amortization

Car loan amortization

Car Loan AmortizationTerms explained:
Amortization – the gradual reduction of a term debt by periodic payments enough to pay the interest and to eliminate the principal at maturity. The amount of periodic rates depends : on the principal, the interest rate and the length of time of the loan.

Amortization schedule – a table containing loan details . At  the beginning of the table we have the amount borrowed and  the time period of scheduled payments. This  amortization table will show each payment that has to be made with the amount that goes towards the principle being deducted from the loan every time. The amortization chart will then show the new balance after each payment you make.

Right now on the internet there are a lot of  websites that offers you loan payment schedules using free Excel templates you can download, or online calculators . For most of them you just enter the loan amount, the interest rate, the term of the loan, date of first payment, and the payment frequency. The spreadsheet makes all the calculations and you are able to search how making extra payments will affect your loan , when you can pay off the loan and the total interest that you pay. You can use this type of car loan amortization calculator to apply to consumer loans and home mortgages also.

Why You Should Know About Car Loan Amortization.

When you think about purchasing a car, doesn`t matter if it`s new or used, amortization will play an huge part in your loan. Car loans  are one of the most popular types of loans in the country and car loan amortization is really important to the process. This is the mean by which the car loan is broken into equal payments through the life of the loan. You can see the benefits of paying an extra payment towards your car loan. The more payments you make that go on the principal, the less the interest you will pay because the loan is paid back faster. Even one extra payment per year, that goes directly to the principal, allows  you to reduce the amount of interest you pay. And, more importantly get out of debt  much faster.

We took  a simplified example of a car loan amortization:

Auto Loan Amount – 15000.00
Auto Loan Term (in months) – 48
Interest Rate – 8%
Auto Loan Start Date – July 10, 2008
Monthly Auto Loan Payment – 366.19

This would mean  266.19 to your loan principal and 100.00 to your interest and your pay off date would be July 10, 2012, with a total interest paid over the life of the loan at 2577.30.

If you add one extra payment per year, on the anniversary date of the loan, your loan will be paid off 3 months earlier, in April 2012, with your total interest paid over the life of the loan at 2395.64.

It`s not just that you can save money by making that extra payment per the car loan amortization schedule, but with  an online amortization calculator you can also shop for car loans. Car loan companies will offer you a way to calculate amortization that is typical for their company and the amount you are going to borrow , which will be based on your credit score and will show you how much interest you`ll be paying over the life of the loan.

This process is important to the loan provider, because  it indicates to them exactly how much interest they can expect to earn each month, as well as when they can wait the loan to be paid completely. Car loan amortization offers companies and consumers the security and knowledge of set payments for the entire duration of the loan.

Some website car loan amortization calculators  offer you a way to quickly calculate lease and loan payments and compare the true overall cost of owning versus leasing. This will let  you to determine whether leasing truly is the better option even if the payment is much lower than borrowing. Car loan amortization plays an important role in your next purchase or lease, depending on your financial situation. The car loan amortization calculator I use is at bankrate.com , it’s free and it lets you enter unlimited variables and see exactly where you can save money.

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