Unlike in past, owning a car nowadays is no longer considered as a luxury but it has been already a necessity. Besides that, cars nowadays have a lot of variations and types, as well as their mode of function. Nonetheless, purchasing a car, especially new ones or even second-hand quality cars still to be expensive. Hence, most people would opt for car loans in order to finance the purchase.
Car loans are secured loan programs. Hence, in order for you to completely release the collateralized lien on a car, you would have to pay the loan in full. Most people tend to think that calculating a payoff can be challenging and complicated. However, this is entirely possible without even using a car loan payoff calculator. All you need to have are the auto loan paperwork and the loan statement, as well as a reliable scientific calculator.
- To begin with, you can use this formula for computation like a car loan payoff calculator:
- M=P (J/1-[1+J]^-N)
- Where M is the monthly payment.
- P is the principal loan amount
- J is the interest in decimal form
- And N is the term of the loan in months (divide the interest rate by 1200 to get the decimal form)
- Next, just simply substitute or put in the values denoted by the formula. For this scenario, let’s say you have a $30,000 car loan for 50 months at 5% interest. Hence, your data should look like this:
- M=30,000 (.004/1 – [1+.004]^-50)
- After that, multiply the monthly payment value by the total remaining months of the loan.
- Just to make sure you don’t miss any other interest on your computation, it is best you check out with your lender and ask if there are any capitalized interests for the loan. The capitalized interest increases if there are any late payments you’ve made for the loan. If there is any, you should add this to the value we have in step 3.
- Now that you computation is done, request for the official payoff statement from your lender. Ensure that your calculation is the same with the lender’s calculation. If there are discrepancies, be sure to talk with your loan officer to have the payoff statement reviewed.