Written by Jouran Crosby
If you are aiming to pay the loan off faster, Let's use the same example as before which assumed our loan was $25,000. The easiest way to figure this out is just take what you intend to pay and subtract the monthly interest due; this will let you know how much will go to the principal.
For Example:
You want to pay an extra $100 a month, and since we are using the $531.18 from the first example, you are going to pay$631.18 for the first payment. Subtract $631.18 (car payment) from $208.33 (monthly interest due) resulting in $422.85 would go to the princpal of the loan.
Step 1:
$531.18 (monthly car payment due) + $100.00 (extra money added to the car payment) = $631.18 (total car payment that you will pay for that month)
Step 2:
$631.18 (total car payment that you will pay for that month) - $208.33 (monthly interest due) = $422.85 (portion of your car not going to reduce the car loan)
For this example we determined that this was the first car note we were going to pay on our loan. So to calculate how much would be left on the loan to calculate the next month's interest follow Step 3 below:
Step 3:
$25,000 (outstanding loan balance due for month 1) - $422.85 (portion of your car not going to reduce the car loan)= $24,577.15 (outstanding loan balance for month 2)
It again does not matter if this is a new loan you just got or a loan that you are already paying. Just follow the displayed steps on this and the first part and you will be able to pay your car loan off sooner than you expect.
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