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How do you calculate interest in a car loan?
I took out a car loan a few years ago. It seems like I’m paying a ton in interest every month, so I can only imagine how much it’ll be for the life of my loan. How would I calculate the interest on my car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s a great question, and fortunately, you can use an online loan calculator to effortlessly calculate the interest paid in a
car loan
. However, if you’d rather calculate the total interest paid by hand, you can use this equation:
A = P x r(1+r)n(1+r)n -1Where:
- 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, grab a calculator and:
- Replace the variables in the formula with your values.
- Multiply A, the monthly payment, by the number of months to find the total amount paid.
- Subtract P, the amount borrowed, from the above value to find the total interest paid.
To help you get over the shock of seeing how much total interest you’ll pay, you can download
Jerry
app to avoid losing money with a bad interest rate. Jerry removes the hassle by giving you one app that instantly connects you with top companies to meet your financial needs. Make sure you’re not overpaying for your car loan by comparing offers from multiple lenders to find the best option for you.
MORE: Does refinancing a car hurt your credit score?
View full answer
- Gregory R.
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