| Sooner or later, everyone wants or needs to buy | | | | convenience of borrowing money. Interest rates |
| a vehicle; and unless you have a money tree in | | | | will fluctuate based on the market, and lenders will |
| your backyard, you're going to need to take out | | | | try to get your business by offering a lower rate. |
| a loan. | | | | Shopping around for a good rate can save you |
| Virtually every new car purchase requires | | | | hundreds of dollars over the term of the loan. |
| financing from a bank or other financial institution. | | | | Loan Principal |
| The only other choice is to pay cash, an option | | | | This is the base amount of money you borrow, |
| few of us have at our disposal. If you're in the | | | | before any interest or financing fees are added |
| market for a new car you'll need financing, and in | | | | on. The amount of your monthly payments, and |
| order to make the right decisions you need to | | | | the total amount of interest you pay, are based |
| know about car loan calculations. If you fully | | | | solely on the principal amount. Naturally, the |
| understand how to make car loan calculations, | | | | monthly payments and overall interest will get |
| you'll be able to estimate the values involved in | | | | higher as the principal increases. If you find that |
| your purchase, as well as balance the expenses | | | | the monthly payment is beyond your means, |
| that come with buying a new car. Knowing this | | | | then you should consider starting with a smaller |
| information is crucial to buying a car that's within | | | | loan principal. In some cases, the term "loan |
| your budget. | | | | principal" can also be used when referring to your |
| Car loan calculations involve a number of factors. | | | | outstanding loan balance. At any given time during |
| Consider the loan term, interest rate and loan | | | | the term of your loan, you can check to see |
| principal and work them into your calculations. Only | | | | what your existing loan principal is. |
| then will you know if the car you want is the car | | | | If your loan is an amortization, you'll find that your |
| you're able to afford. | | | | first few months of payments will only pay off |
| Loan Term | | | | the interest amount. You can pay $500 a month |
| Basically, this is amount of time it will take to pay | | | | for 8 or 9 months, only to find that a fraction of |
| the loan in full. A shorter term will mean higher | | | | that amount has been taken off of the principal. |
| monthly payments, but the loan will be paid off | | | | Over time, however, the payments will balance |
| faster. Longer terms involve more affordable | | | | out and you'll begin to see more money coming |
| monthly payments, but it will take more time to | | | | off of the principal. Eventually, the entire loan will |
| meet your obligation. The length of your loan | | | | be paid. |
| term can also affect the interest rate, and can | | | | Buying a car always seems like a great idea, but |
| increase the amount you pay in interest overall. | | | | the payments really can be quite overwhelming. |
| Interest Rate | | | | Don't put yourself in a situation where there's |
| No banks or finance companies will lend you | | | | more month than money. Car loan calculations are |
| money out of the goodness of their hearts. They | | | | absolutely necessary to putting yourself in the |
| make money from interest. The interest rate | | | | driver's seat, without putting yourself in the hole. |
| determines how much extra you will pay for the | | | | |