How do I calculate a financing charge on a car loan?
I’m getting a loan and I was reading the fine print. It mentioned something about finance charges and showed an amount, but I’m not sure what these charges are. How can I calculate the financing charge on my car loan?
Finance charges include interest, fees, and taxes rolled into your car loan. To determine your finance charges, multiply your monthly payments by the number of payments in your loan and subtract this amount from the principal of the loan (the total amount borrowed).
For example, let’s say your monthly payment on a 48-month loan is $450. Following the formula above, you should multiply these two numbers together to get $21,600. If you borrowed $24,000 for the car (the principal), subtract $21,600 from $24,000 to get $2,400. So in this case, your finance charges are $2,400, which includes interest paid, taxes, and fees.
If you’re budgeting for your finance charges, do the same for your car insurance. Your lender likely requires full coverage car insurance on your financed vehicle, which can get pricey if you don’t shop around. Try using the number-one-rated car insurance app, Jerry. As a licensed broker, Jerry helps you find and compare quotes from over 50 top providers in minutes. When you find a better rate, Jerry can help you buy your new coverage and even cancel your old policy!
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