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How do I calculate my car loan interest with a formula?
What is the formula to calculate my total interest on my loan? When I took out a loan to buy my car for work, my brother told me how I needed to pay interest on the loan. How can I calculate the total interest amount to know how much it is?
Phoebe Mah · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Your brother is correct that you will need to pay interest on your loan. Don’t worry, the interest is part of your monthly payment.
- Convert your interest rate into a decimal. (If your interest rate is is 4%, this becomes 0.04)
- Multiply your principal amount by your interest rate. (If your loan amount is $20,000, multiply this by 0.04, which equals $800)
- Take the answer and multiply it by the number of years your loan length is. (Let’s say your loan is 72-months or six years. Six times $800 equals $4,800)
- The answer is the total interest you will pay on your loan.
Remember that lenders will require full coverage car insurance for financed vehicles. Check out affordable car insurance options with the number-one-rated car insurance app,
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