# Car Loan Amortization

Car loan amortization is a procedure used to pay off the original loan taken out to pay for a car that you have purchased. Every month you will make a payment to the lender and this amount will cover a certain part of the capital loan, and in part will pay for the interest that is owed on the loan. In order to work out where you are with the repayment of your car loan you can use an amortization calculator. This is also useful if you are planning to apply for a car loan and want to work out how much you can borrow and what the resulting monthly repayments will be. Applying for a loan with this information in hand will stand you in good stead to show the lender that you have done your homework.

**The amortization calculator**

You will be able to find good working examples of car loan amortization calculators on the internet. They contain tables that show you exactly how the car loan amortization works on a progressive monthly basis. You will be able to see how much interest you will be paying over the years of the loan and the balance that will need to be paid, should you find yourself in a position to close the loan in advance. Once you have entered all the details by clicking the calculate button the results should be displayed and you can print these off for future reference.

**Donâ€™t pay more than you should**

The amortization table gives you useful information on how much you should be paying on a monthly basis. The important objective is to not pay more than the vehicle value at any given time. It is possible to find estimates for how much your car would be worth over a series of months, for example, if bought from new or second hand check its value after 6 months, 12 months and 18 months. You will need to enter the amount of time you will have left to repay the loan. Usually car loans run for between 4 to 6 years and you need to enter the interest rate you have been offered. Once all the details are entered, you can view the results month by month until the loan is fully paid. Obviously the longer the loan period the more interest you will have to pay.

The amortization calculator table can allow you to enter additional details too. For example, if you are making a down payment, have access to a car purchase rebate or are planning to trade in your previous car. Enter the amounts into the calculator to make sure you get the right results. It is also possible to use the repayment calculator to check what would happen if you decided to go for different payment intervals, or were able to find lower interest rate loans than those you have identified so far.

**How loan terms and rates of interest can work**

Take an example of a loan for $10,000. If you were offered the opportunity to pay this loan off over a period of 5 years and the interest rate would be 6%, you would need to pay a monthly sum of $193.33. At the end of the 5 years, you would have paid a total of $11,599.80. Therefore, the amount of interest would be $1,599.80. If, however, you were able to find a car loan at 5%, the monthly repayment would be $188.77 and the total interest to be paid would be $1,322.74 saving you $270, not an insignificant sum.

If you could afford to pay your car loan of $10,000 over 4 years, the monthly amount you would pay on a car loan with interest at 6% would be $234.85, but the total interest would reduce to $1,272.81. As you can see going for the shortest affordable repayment plan and seeking out the best rate of interest can be directly beneficial.

**Final car loan amortization checks**

As part of your car amortization calculations you should always take into account the actual value of your car. The moment you purchase a new car and drive it away from the showroom it will immediately lose value. In the first few months the value of your new car will drop faster than the car loan repayments you are making. However after about 12 months the cars actual value will be more or less equal to the outstanding amount of your loan.