How do you calculate your car loan monthly payments?
I was offered an $8,000 car loan for 36-months with a 5% interest rate. Overall, the offer seems good to me, but I’d like to break it into monthly payments to start budgeting. What should I do to calculate my car loan monthly payments?
Car loans can seem intimidating when you look at them as a single lump sum. But, they’re much more manageable when you break them down into monthly installments. Luckily, you can calculate your monthly payments by adding the total balance and interest before dividing it by the term.
Here’s a breakdown of the process using your situation as an example:
- Step 1: Calculate what you’ll pay in interest by dividing your interest rate by 100 and multiplying it by your balance. In your case, it should be 5% divided by 100 times $8,000 (your total balance), which equals $400.
- Step 2: Add your interest to the balance to find out how much you’ll pay in total. For you, that means adding $400 (what you’ll pay in interest) to $8,000 (your balance) for a total of $8,400.
- Step 3: Divide your total by the number of months in your term. That means you’ll divide $8,400 by 36 months, for a total of $233.30 a month.
Hopefully, this helps you understand how to calculate your monthly car loan payments! If you do the math and are worried about the additional expense, offset the price by saving on car insurance with Jerry.
A licensed broker, the Jerry app can help you compare personalized quotes from over 50 top providers like Progressive and Nationwide for free. When you find a better plan, Jerry can help you buy your new coverage and even help cancel your old policy.
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