How is interest rate calculated on a car loan?

I recently got a new car and a car loan to help pay for it. But the payments I’m making each month are a bit more expensive than I was expecting. I’m assuming it’s my interest rate that is causing my monthly payments to be higher, but I want to know for sure. How do you calculate the interest rate on a car loan?

Answer
I’m sorry to hear that you’re paying more than you expected–that’s never a good feeling. You should be able to find the interest rate for your car loan on your loan paperwork without doing any calculations.
If you want to challenge yourself to calculate how much of your monthly payment goes towards interest:
  • Divide your interest rate by the number of payments you make in a year
  • Multiply it by the remaining balance for your loan
The resulting number should be the amount you pay in interest per month.
Refinancing is a great way to save money on your car loan’s interest rate and help you save money each month. Finding the right lender can be a huge pain that might end up costing you time and money.
The Jerry app 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. On average, car owners pay $85 less every month by refinancing their auto loan.
Chloe Jenkins
Answered on Nov 23, 2021
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