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How do you figure the interest on a car loan?
What’s the best way to figure the total interest on a car loan? I’m not very good at math, but I need to know how much my loan will cost me over time.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
You can
figure the interest by hand
by multiplying the interest rate by the principal, then multiplying the resulting number by the number of years in the loan term. For example, if you have a loan for $30,000 with a 5% interest rate and a 60-month repayment period, the calculation will look like this:
Total Interest = (0.05 x 30,000) x (60 / 12) = 1,500 x 5 = $7,500 in interest
If you would prefer to leave the math to your computer, you can also use Microsoft Excel or Google Sheets to calculate how much you’ll pay for your car loan. Just open a new document and type the following formula into a blank cell:
=CUMIPMT(yearly interest rate/12, duration of the loan in months, the loan principal, 1, the total number of payments you will make, 1)
Then, plug in the numbers that are on your loan agreement. If all of the information that you provide is correct, the result should be the total interest!
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