Amortization Schedule

Auto Loan Amortization Schedule

What's New About An Auto Loan Amortization Schedule?

Anyone who borrows money from a bank or other lender is likely to get an loan amortization schedule to review. This document shows the true dollars and cents behind loan repayment. An auto loan amortization schedule is slightly different from the one you get when you apply for a home loan. In fact, it much easier to understand and digest.

Like a mortgage loan amortization schedule, an auto amortization schedule shows a full breakdown of payments and how they work. To create this important document, lenders use the amount borrowed, or principal, the interest rate and the number of payments. From these figures, they calculate a set payment amount. Lenders can also fix the total interest charges for the full term of the loan.

A comprehensive car loan amortization schedule will show:

  • Number of payments. You can find a breakdown of each payment and the number of times you will pay for the entire term of the loan.
  • Payment amount. The schedule will show the payment amount and how your lender will apply it to service your loan. Two columns that add up to the payment amount will be present. The first column will represent the payment that will go to reduce the principal. The second will show how much of a payment is going to the bank or lender in the form of an interest payment.
  • Balance. The schedule will typically also show the outstanding principal balance after the lender applies a payment. Because of interest charges, the principal amount will go down gradually at first with dramatic declines as the loan nears its maturity.
  • Total interest payments. The amortization schedule makes it easy to see how much you will the lender for the privilege of borrowing the money. This figure on a car loan is typically not anywhere near as scary as a 30-year mortgage loan. But it is the price you pay for using other people's money to finance your high ticket items.
Seeing an auto loan amortization schedule won't likely turn you away from taking out a loan. This is especially so if you need a car. However, taking a good look at it can help you understand how financing your car works and what you can do to save a little money in the long run. With simple interest loans, for example, extra payments or extra principal payments tacked on to a regular payment can make a big difference in your total borrowing costs. The quicker you pay off the loan, the less interest you will pay. It is worth taking a look at the numbers and your choices to see if you can use an auto loan amortization schedule to beat the banks at their own game.

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