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How to Calculate Auto Loan Interest

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If you’re wondering how to calculate your interest rate on a car loan, we’re here to help answer all of your questions. Edwards Chevrolet Co., Inc. is here to cover all of the terms you’ll likely encounter as you’re learning how to figure interest on a car loan. We’ll also go over the factors that play into the determination of car loan interest. After reading our quick guide, use our payment calculator to get a good estimate to expect as youapply for financing online

What is an Auto Loan Interest Rate? 

When Gardendale drivers apply for an auto loan, they’ll pay both the original loan amount and interest on the loan. Auto loan interest represents profit for car dealerships as they are distributing car loans. You can think of interest as the dealership’s fee for loaning you money to purchase your next vehicle. As you learn how to calculate interest on a car loan, you’ll want to understand the following concepts: 

  • Principal Amount: This amount represents the amount of the loan you are initially applying to borrow from a lender.
  • Loan Term: This is the amount of time given to pay off a loan. Smaller monthly payments and more interest mark long loan terms. Shorter loan terms have bigger monthly payments and less interest. 
  • Repayment Amount: This is the final amount you pay (the original principal amount plus the interest accumulated) on a loan. 

How to Calculate Auto Loan Interest on Your Initial Payment

As you’re learning how to calculate your auto loan interest for your first payment near Hoover, you can use this simple formula in advance to learn how much you can expect to repay: 

  1. Your interest rate should be divided by the number of monthly payments in the year that year.
  2. Multiply your loan balance by that figure. That amount will be your complete principal amount for your initial payment.

How to Figure Interest on a Future Car Loan

Now that you’ve learned how to figure interest on a future car loan let’s explore how to calculate auto loan interest for your remaining payments. 

  1. Subtract interest calculated from the payment already made. This will give you the principal you have thus far paid off on your loan.
  2. Subtract that total from your initial principal.

Let Edwards Chevrolet Co., Inc. Help You Calculate Interest

If you still need help to understand how to calculate interest rate on a car, contact Edwards Chevrolet Co., Inc. near Bessemer. We can also help you find offers and incentives available to help you keep principal amounts as affordable as possible. Also, take advantage of our trade-in valuation tool to ensure that you’re always getting a great trade-in value. If you have any other questions about how to calculate auto loan interest, check out our car buying tips, or contact us today! 


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