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How can I calculate the total interest on a car loan?
I’ve been looking to purchase a new car for a few months. I finally found the vehicle I want, but I’ll need to take out a $27,000 car loan to afford it. I’ve been shopping around to find the best interest rate, but how can I calculate the total interest on a car loan? If it helps, the loan will be for 48 months and the best APR I’ve been offered is 3.6%.
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congratulations, finding the vehicle you want to purchase is always exciting. I’m happy to hear you’re shopping around to find the best rate for your
car loan
! The easiest way to calculate the total interest on a car loan is to use an online calculator or ask the lender directly. However, if you’d like to calculate the total interest paid by hand, you can use:
A = P x r(1+r)n(1+r)n -1
Where:
- A is the monthly payment
- P is the principal or amount borrowed
- r is the interest rate per month expressed as a decimal
- n is the term or length of the loan expressed in months
To calculate the total interest using the information you provided:
- Fill in the formula with your values and solve.
- Once solved, multiply A, the monthly payment of $604.81, by 48 to find out how much you pay in total, which is $29,030.88.
- Subtract P, the $27,000 borrowed, from the total cost, $29,030.88, to find the total interest paid is $2,030.88.
Once approved for a loan, don’t forget you’ll need
proof of insurance
. While calculating a loan’s total interest is confusing, finding a new car insurance policy doesn’t have to be. To take the hassle out of finding and purchasing a new policy, use
Jerry
. Jerry is an insurance comparison app that collects quotes from over 50 top insurance companies, like Travelers, Nationwide, and Progressive, in seconds. View full answer
- Gregory R.
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