How to Figure Out the Interest on My Auto Loan

If you want to calculate the interest on your auto loan, there are a couple of methods you can use. First you need all of the variables involved such as the interest rate, term of the loan, monthly payment and the amount financed. When you are able to calculate your interest, you will be able to determine the total amount of the loan. With a lower rate of interest you will pay less in interest charges. If you have a shorter loan term you will pay less in finance charges and longer terms generate more interest charges.

Instructions

1

Get an auto loan calculator. An auto loan calculator is a tool used to calculate figures such as payments and interest for loan financing. The figures used in this article are examples. Input the amount of the loan, $15,000, the loan term, 48 months, and the interest rate of 7 percent, and hit the calculate button to get a payment of $359.19. Once you have all the variables, take the monthly payment of $359.19 and multiply it by 48, the number of months in the term, and you will get the total amount of the loan, which is $17241.12. Subtract the amount financed of $15,000 from $17,241.12 and the difference is the interest charges of $2,241.12.

2

Take the annual percentage rate and divide it by 360 and multiply the result by the number of days in the billing cycle. The result of that calculation is multiplied by the outstanding balance, which provides the figure for interest for one month. Start with a balance of $15,000, monthly payment of $359.19, term of 48 months, and an annual percentage rate of 7 percent. Take .07 divided by 360 = .0001944 times 30 days in the billing cycle = .005832 times the outstanding balance of $15,000 = $87.48. The finance charges for the first month will be $87.48.

3

Deduct the interest of $87.48 from the monthly payment of $359.19, which equals $271.71. The result is the principal payment or the amount that will be subtracted from the balance of $15,000. The new balance is now $14,728.29. To calculate the interest charges for the second month you start the equation all over again, but this time you use the new balance in the equation. When you do the calculation, your interest charges for the second month will be $85.89. To get the total amount of interest charges for the entire term you can do this calculation for 48 months, which would be time consuming.

4

Use the auto loan calculator. Enter the amount financed, interest rate, term of the loan and hit calculate to get the payment. Click on the button that says, "show/recalculate amortization table," and the interest charges will be calculated for each month in the 48 month term. Notice that the interest charges will gradually decrease as payments are made. The amount of interest paid is always more at the beginning of the loan.

5

Make extra payments on the loan. If you make extra payments, the balance will be paid off faster and you will pay less interest over the remaining term of the loan. Determine how much extra you want to pay by inserting the amount in the calculator under the "extra payment section". Now hit the "show/recalculate amortization table" button to run the amortization schedule. Interest charges will be recalculated for the 48 month term.