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How do you figure the monthly payments on a car loan?

How do I figure the monthly payments on my car loan? I want to know how much I’ll be paying every month before I sign the agreement.

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Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
To calculate the monthly payments on your car loan, you’ll need to calculate the total interest that you’ll pay throughout the loan. To do this, multiply the interest rate by the loan principal amount, or the cost of the loan before interest and fees. Then, multiply the resulting number by the loan term in years.
That sounds a bit confusing, so here’s an example. If you take out a $10,000 loan with a 5.5% interest rate and a six-year repayment period, the calculation will look like this: Total Interest = (0.055 x 10,000) x 6 = $3,300 total interest
If you don’t want to do it by hand, don’t worry–you can use Microsoft Excel instead! Just type the following formula into a blank cell: =CUMIPMT(yearly interest rate/12, duration of the loan in months, the loan amount before fees and interest, 1, the total number of payments you will make, 1)
Once you know the total interest that you’ll pay on your loan, you can add that number to your principal. To get your monthly payment amount, simply divide by the loan term in months. If we use the example loan from earlier, the calculation will look like this: Monthly Payment = (3,300 + 10,000) / (6 x 12) = 13,300 / 72 = approximately $184.72 per month
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