How to Calculate a Car Loan Rate
The Annual Percentage Rate (APR) of a car loan will determine what you will pay in interest on a monthly and a yearly basis. Calculating the rate on a car loan is a straightforward task that can be accomplished using a free online calculator or a manual calculator. Knowing the rate of a car loan will give you a better understanding of whether or not you can afford the payments.
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Instructions
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Use An Online Calculator
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Locate an online auto loan calculator. Some examples of websites that have calculators that can determine the APR on a car loan are: edmunds.com, bankrate.com and capitalone.com. Go to any one of these websites and click on "Calculators," "Loan Calculator" or "Loan APR." The calculator page will be displayed.
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Type in the relevant information in the text fields. Some information you will need to include is the auto loan amount, the term length of the loan, and the interest rate.
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Click the "Calculate" button to get the results. The monthly and annual loan payment will be displayed along with the final cumulative loan amount and APR.
Manually Calculate The Rate
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Calculate the car loan rate using a standardized equation. The equation is: i = 2 x n x I / P(N + 1) where i is the APR, n is the number of payments in one year, I is the total financing charges, P is the amount of borrowed and N is the number of scheduled payments. Use this equation to determine the APR.
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Insert the numbers for your car loan into the equation. For example: i = 2 x 12 x $800 / $10,000 (6 + 1) = $19,200 / $70,000.
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Solve the equation using a calculator. After working out the equation the result will be the APR. For example in the previous example: i = 2 x 12 x $800 / $10,000 (6 + 1) = $19,200 / $70,000 = 27.4 percent. The rate for your car loan in this example is 27.4 percent.
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Tips & Warnings
Double check your numbers to ensure your calculations are correct.
References
Resources
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