Extra Principal Payment Calculator Auto
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Reviewed by Calculator Editorial Team
Paying extra principal on your auto loan can help you save on interest and pay off your loan faster. This calculator helps you determine how much extra you should pay each month to reach your payoff goal.
How It Works
Extra principal payments work by reducing the principal balance of your loan faster than the regular payments. This means you'll pay less interest over the life of the loan and can pay it off earlier.
The calculator uses your current loan balance, interest rate, and regular monthly payment to determine how much extra you should pay each month to reach your payoff goal in a specific number of years.
Formula
The formula used to calculate the required extra principal payment is:
Extra Payment = (Loan Balance × Interest Rate × (1 + Interest Rate)^n) / ((1 + Interest Rate)^n - 1) - Regular Payment
Where:
- Loan Balance - Current principal balance of your loan
- Interest Rate - Annual interest rate of your loan (in decimal form)
- Regular Payment - Your regular monthly payment amount
- n - Number of payments remaining on your loan
This formula calculates the monthly payment needed to pay off the loan in the specified number of years, then subtracts your regular payment to determine the extra amount you should pay each month.
Example Calculation
Let's say you have a $20,000 auto loan with a 5% annual interest rate, a regular monthly payment of $350, and you want to pay it off in 3 years (36 months).
Using the formula:
Extra Payment = ($20,000 × 0.05/12 × (1 + 0.05/12)^36) / ((1 + 0.05/12)^36 - 1) - $350
Extra Payment ≈ $45.23
This means you should pay an extra $45.23 each month to pay off the loan in 3 years instead of the original term.
FAQ
- Can I make extra principal payments on my auto loan?
- Yes, most auto lenders allow extra principal payments. However, check your loan agreement to confirm.
- Will making extra payments hurt my credit score?
- No, making extra payments on time will actually help your credit score by reducing your credit utilization ratio.
- How often can I make extra principal payments?
- You can typically make extra payments at any time, though some lenders may require a minimum amount or frequency.
- Will making extra payments change my interest rate?
- No, making extra payments will not change your interest rate. It will only affect your loan term and total interest paid.
- Can I make extra payments in a lump sum?
- Yes, many lenders allow lump sum payments. However, check with your lender to confirm.