How to Properly Calculate Your Car Loan Payoff Balance

January 27, 2012

If you just purchased a car with auto financing, you might want to calculate the car loan payoff balance so you know how much you owe. The sooner you can pay the car off, the better. You can figure out just how much you will need to increase the amount of money you pay each month. The extra money you add to your monthly payment can be deducted right off your loan balance. Here are some suggestions for helping you determine your payoff car balance.

Step 1 - Check for Prepayment Penalties

There are a lot of lenders out there that will let those that borrow from them pay on the principal balance of the loan. There generally won’t be a prepayment penalty. However, before you do something like this, make sure they don’t hit you with a prepayment penalty.

Step 2 - Call for Payoff

You can actually skip the calculations by just calling up your lender. He or she can give you a payoff balance that is good for a certain number of days. From there, you can calculate car payments based on the amount of time you want the loan to continue.

Step 3 - Find out Current Balance

If you find out what your current balance is, you can then get a daily increase for your loan. This will be an additional amount you are charged in interest every day. For instance, if you owe $5,000 on your loan, you still may see a $3 or $4 increase in your payoff every day. If you don't pay for 30 days with a $3 daily increase, the total will then be $5,090. You can find all of this out from the lender you go through.

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