PriceProtect™
DriveShield™
GarageGuard™
Services
Insurance
Car Insurance
Compare Car Insurance with Jerry
Jerry’s Expert Advice
Car Insurance Estimates
Home & Renters Insurance
Renters Insurance
Loans
Car Loan
Compare Car Loans with Jerry
Jerry's Expert Advice
Car Loan Guides
Repairs
Car Repair Estimates
Repair Estimates for Popular Services
Advice
Read Car Content
Browse Jerry Car Advice
Check Out Expert Car QnA
Learn About How We Create Content
Jerry Data & Research
How does car loan interest get calculated?
How do car loan lenders calculate the interest on a loan? I’m confused because there are so many different rates online for the same type of loan.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Getting a
car loan
can be overwhelming, but they’re a lot easier to understand once you know what information you need. Your credit score usually determines your interest rate and APR. If you have good credit and choose a short loan term, you’ll typically have a good APR. With a low credit score, you’ll likely have a higher APR. That said, the APR on a car loan includes interest and fees, while the interest rate does not.
When your lender calculates the interest rate before fees, they might use simple or precomputed interest.
- Simple interest is calculated at the time of each payment based on the remaining principal of your loan. When you make extra payments on a simple interest car loan, you reduce the amount of interest that you’ll need to pay for the life of your loan.
- Precomputed interest is calculated at signing and distributed evenly across your payments. Even if you make extra payments, you’ll still have to pay the same amount for the life of the loan.
If you have low or limited credit, don’t worry! You can try to find a cosigner to score better terms on your loan. You can also make a large downpayment. Lenders will typically offer lower interest rates to borrowers who pay large amounts up front.
While it can be hard to find the right car loan, it’s easy to find the best insurance policy with the
Jerry
app. Jerry collects customized quotes from top providers like Nationwide and Travelers! When you find a quote you like, Jerry will help you switch policies.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Join 4M+ members in lowering their car insurance
You Might Also Be Interested
Read Advice From Car Experts At Jerry
What Others Are Asking
Browse More Content
Insurance for Your Car
Insurance in Your State
Easiest way to compare and buy car insurance
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
