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How much interest will you pay on a car loan?
How do I calculate the total interest I will pay during my loan? I recently received a quote to open a loan account to purchase a Jeep Wrangler. The lender offered me a 6% interest rate, and my loan amount is $30,000. I know part of the loan payments I make will go towards interest, so I’m curious to know how much interest I will pay during my five-year loan term.
Phoebe Mah · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
You are correct that parts of your loan payment will go towards paying your interest! To know
how much interest
you will pay on your car loan, you can calculate it by doing the following:- Take your total loan amount and multiply it by your interest rate. Remember to put the interest rate into a decimal value. For example, $30,000 x 0.06 = $1,800.
- Next, take the value of that equation and multiply it by the number of years of your loan term. The answer to this equation is the total amount of interest you will pay throughout your loan. For example, 1,800 x 5 = $9,000.
For the course of your loan term, you will pay about $9,000 in interest.
Alternatively, if you would like to know how much interest you will pay every month, this is how you can calculate that:
- First, calculate the monthly interest rate by dividing the decimal value of your rate by 365 and multiply the answer of that equation by your total principal loan amount. For example, (0.05/365) x 30,000 = 4.1095.
- Next, multiply the answer by 30 (to represent one month). The answer to this equation is the interest you will pay every month. For example, 4.1095 x 30 = 123.28.
This means during your loan period, the monthly interest you will be is around $123.28.
Before you purchase your car, make sure you have a car insurance policy in place for your vehicle. If you want to save money on car insurance, the
Jerry
app is a good place to start. A licensed broker, Jerry does all the hard work of finding cheaper quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy!View full answer
- Gregory R.
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