How to Pay Back an Auto Loan With Interest

Many people borrow money to pay for a new or used car purchase. Taking a loan for the purchase is a convenient and efficient way to acquire a new vehicle if you do not have the money on hand to cover the purchase outright. Most, if not all car loans, however, require that you pay interest on the unpaid balance, computed as an annual percentage rate (APR). The APR for your loan should be clearly stated in your loan agreement. Most consumers pay their car loans and interest in combined monthly installments over several years.

Instructions

1

Review your loan agreement to determine your loan repayment terms. Your lender should have specified terms such as the loan amount, repayment period and annual percentage rate. It is always a good idea to read your official loan documents carefully to verify this information.

2

Verify the amount of your monthly payment. The lender should have told you this information at the time the loan was executed. If you are not certain of the amount you must pay each month, you can determine your payment by dividing the total principal amount of the loan by the number of months in your repayment term. The product will be your monthly principal payment. To calculate your monthly interest payment, multiply your monthly payment by 12. Multiply the product by your annual percentage rate. Divide this product by 12 and add the resulting amount to your monthly principal payment. This final calculation should yield your total monthly payment, including interest.

3

Mail your monthly payment or transfer it online to your lender on or before the payment due date each month. Your loan agreement should state the date the payment is due as well as an address or website to send your payment to or through. If you don't know where you should send your payment, contact your lender for details.