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How do you calculate the monthly interest on a car loan?
What’s the best way to calculate the monthly interest on my car loan? I want to make sure that I’m budgeting enough for all of my payments.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Understanding what you pay in interest on your car loan might seem complicated—but try not to worry! You can follow these steps to
calculate the monthly interest
on car loan payment:- Step 1: Divide your interest rate by 100. If you have a 5% interest rate, you should divide it by 100 to get 0.05.
- Step 2: Multiply the answer from step 1 by your loan principal. If you owe $10,000 with 5% interest, you should end up multiplying $10,000 by 0.05—the answer should be your total amount of owed interest.
- Step 3: Divide the total amount of interest by the number of months in your term. If you owe $500 in interest on a 12-month loan, then you’ll need to divide $500 by 12 to find out what you’d pay in interest every month.
Hopefully, these steps will help you calculate your monthly interest! But if you’d rather not do the math by hand, search for a loan interest calculator online. Many organizations like Bank of America offer free tools to help people better understand their financial situations.
Since you’re already taking the time to understand your monthly payments, take an extra minute to lower them with
Jerry
. A licensed broker, the Jerry app helps users save an average of $879 a year on car insurance. Just download the app, answer a few questions—and Jerry will help you compare personalized quotes from over 50 top providers like Progressive and Nationwide for free.View full answer
- Gregory R.
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