How to calculate your used car loan payments: Tools and tips

used car loan payments: Tools and tips

When a prospective buyer is out there shopping for a car (new or used), it is important to determine how much money he/she is willing to spend on the upcoming possession. This will help them set a price range that'll form the basis of all future purchase-related decisions and calculations.

KEY TAKEAWAYS

  • How does a borrower’s credit score impact the auto loan interest rate?

    A borrower’s credit score shows a lender how they previously handled car financing. Lenders may look for late payments, repossessions, or bankruptcies on car loans. While credit score matters, one can still get a car loan with shaky credit but at a higher interest rate.
  • How much money should a buyer put down on a used car?

    If the buyer wants to pay as little interest as possible then he needs to put down as much as he can afford. The more you put down, the less will be the need to borrow and pay off later.
  • What are the top factors affecting used car loan payments?

    Several factors affect the car loan EMI calculation including down payment amount, interest rate, loan amount, and loan term.
  • Now, once the buyer has locked in a used car and even taken up a used car loan; the next step is to calculate the monthly payments. In case you are still struggling to get a loan on your used car, we suggest you read the article on major tips to get a used car loan in the Philippines. Follow the suggestions and you’ll get your loan application approved without any more delay.

    Also Read: Beginner's guide to financing a used car in the Philippines

    Coming back to the topic of how to calculate used car loan payments. Let us first find out the real beneficiaries of the information. It includes

    End user who has acquired the used car loan
    Prospective used car buyer who is still looking at options (both used car and financing).

    While the former will get to know the estimated monthly payment details, the latter will get to know how much he/she can afford to spend on a car each month without compromising on their financial obligations. In short, the buyer gets a chance to get the personal finance in order before applying for the loan.

    Calculating used car loan payments in the Philippines involves several tools. Here's a guide on how to calculate car loan interest per month.

    used car loan payments: Tools and tips

    #1 Manual EMI calculation

    Calculating used car EMI is a pretty straightforward process which includes three major components namely, the loan amount, loan tenure, and interest rate. Here’s how to calculate interest on a car loan manually.

    EMI formula

    Note that human error and rounding off can cause one to miss out on an exact calculation each time, however, it will give you a basic idea of how much interest there is on the loan.

    #2 Automated EMI calculation

    How to calculate car loan interest per month? One of the easiest ways to calculate your used car loan interest per month is by using an auto loan calculator. Several banks and financial institutions in the Philippines offer loan calculators that can be accessed via their website or mobile application.

    Here the user is only required to put in place the required variables such as loan amount, loan term, and interest rate, along with additional fees like processing and insurance fees (if applicable). Once all the information is locked in, the calculator will present the borrower with an estimated monthly payment.

    There are several benefits of using an auto loan calculator apart from it being a quick, easy, and hassle-free tool for used car loan repayment. The list includes -

    • Show loan EMI in seconds
    • Eliminates the need for complex manual calculations
    • Helps the borrower choose the loan tenure for repayments; a shorter duration leads to quicker loan repayment with the EMI on the higher side, likewise a longer tenure will lead to higher interest amount with EMI on the lower side

    There are several online loan calculators available in the market with more or less similar processes. Here is how to use an automatic loan calculator -

    • Open the preferred auto loan calculator on Google
    • Enter the loan amount you intend to borrow
    • Enter the applicant's interest rate
    • Select loan tenure
    • Submit the info and the system will generate the EMI along with the total interest and total amount payable

    Depending on the loan calculation tool, the user might need to give a few additional details like car price, income, age, loan scheme, etc.

    used car loan payments: Tools and tips

    After we have discussed how to calculate interest on a car loan, it’s now time to discuss crucial tips related to the subject. Also, are mentioned basic factors that play a major role in influencing your monthly payments.

    Car price

    Estimating the price of the car is a complicated process. While negotiation is given, one must start asking the price. Local classified ads and online price guides are good sources to get a fair idea about the esteemed product.

    Downpayment

    The downpayment amount boils down to the cash a buyer is willing to put towards the vehicle upfront. Irrespective of the down payment amount, it helps reduce the monthly payments and amount of interest paid throughout the repayment phase.

    In case the buyer is not putting down any cash payment, he/she can mention zero as the down payment amount in the calculator.

    Loan amount

    A loan calculator also asks about the amount of loan the borrower wants from the lender. In case the borrower is unsure, the space can be left blank with just the amount for the car price and downpayment going in. Often calculators automatically determine the loan amount.

    Loan term

    By loan term, we mean the amount of time a borrower needs to repay the used car loan. Mostly expressed in months, the common time frame ranges from 36 months (3 years) to 72 months (6 years).

    Note, that a longer loan term leads to lower monthly payments and higher interest. Therefore, always select the loan term that suits your budget and financial goals.

    Interest rate

    Interest rates on loans significantly impact the amount a borrower will pay in interest over the entire duration of the auto loan. Several factors determine one’s interest rate including, the borrower’s credit score, downpayment, credit history, loan term, current rates, and loan amount.

    Borrowers can check interest rates from online lenders. However, if you are already pre-approved for a used car loan, enter the interest rate in the calculator.

    USED CAR LOAN PAYMENT

    Payment amount

    Once the user fills in the above-mentioned details, the auto loan calculator will generate an estimated payment amount that the borrower will be paying each month.

    Downpayment percentage

    Some auto loan calculators automatically generate the down payment percentage, given that the borrower has entered information like the car price and downpayment. This figure comes in handy when the lender asks for a minimum percentage cash deposit.

    used car loan payments: Tools and tips

    Total interest

    The total interest amount helps the borrower know how much money he’ll pay in interest over the entire duration of the loan.

    Principal and interest

    Auto loan calculators provide borrowers with an estimate of their total principal amount and interest. Which roughly translates to the amount the borrower will pay in total over the entire duration of the loan.

    Summing up

    Calculating used car loan payments in the Philippines doesn't have to be a daunting task. With the right tools and tips at your disposal, you can navigate the process with ease and confidence. Use online loan calculators to estimate your monthly payments and shop around for the best deal. And if you ever need assistance, don't hesitate to seek professional advice. Happy car hunting!

    Also Read: Top 5 tips to get approved for a used car loan

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