How to Calculate the Balance of a Car Loan

Car loans usually extend over a period of years, and you may find it necessary at some point during the term to calculate the remaining balance. You'll need to know this if you want to pay off the loan early, or if you're trading the car in, or even if you've had an accident and your insurance doesn't pick up the entire amount. Here's how to calculate the balance of your car loan.

Instructions

1

Obtain the original amount of the loan. Your loan documents should have the loan amount clearly stated. Also, a monthly car payment bill may provide the information as well. We can take for example a $20,000 car loan.

2

Find the length of the loan. Because car loans are done with compounding interest, the term of the loan will tell you how long the interest is compounding. In the example we will look at a 60 month loan.

3

Check for the interest rate on the car loan. The interest rate is different from the Annual Percentage Rate or APR because the interest rate does not take into account the compounding aspect of a car loan. So you'll need to use the interest rate to get the APR. For the example, say the interest rate on the $20,000 loan is 5 percent. This would give a monthly payment of $377.42.

4

Determine how many payments have been made. For the example, say that 24 payments had already been made.

5

Plug the variables into the equation. You now have all of the tools to plug into the equation to figure how much money is left on the balance of the car loan. The equation is as follows:

Balance = Original Loan Amount x (1 + (Interest Rate / 12))^ Number of Payments - Monthly Payment / Monthly Interest Rate [(1 + Monthly Interest Rate)^24-1]

First calculate the monthly interest rate by dividing .05 by 12. This equals .004166.

Plug the rest of the numbers in to the equation to get the following:

B = 20,000 x (1.004166)^24 - (377.42/.004166) x [(1.004166)^24 - 1]

This results in a balance due of $12,592.88

This means that after 40 percent of your payments are complete (24/60), you've paid off 37 percent of your loan (7,407.12/20,000).