What is a car loan amortization?
The individual takes a car loan if he cannot afford to make a payment at the full price of the car. The amortization of car loans concerns the process of carrying out several regular installments to the amount it owes for a specified period of time. When the debtor makes every payment, the amount of outstanding loans decreases until the debt finally pays completely at the end of the amortization period of the car loan.
AMORTIZATION OF CARS BRANDS requires the debtor to pay off the debt in several installments. The amount of each installment depends on the interest rate, the time of the loan and the amount of the loan. If the debtor has this information, he can calculate the repayment amount using the formula.
in the formula "P" represents the main or loan, "R" represents an annual interest rate and "M" means a period of loans in the months. The amount of every repayment can be calculated using the following formula: [P (R / 12)] / [1 - (1 + R / 12)
For example, assume that car buyers make a deposit of $ 5,000 in USD (USD) per car for $ 20,000. The three -year loan has an interest rate of 7 percent. The director would be $ 15,000 ($ 20,000 - $ 5,000), the annual interest rate would be 0.07 and the loan would be 36 months. Connecting numbers to the formula The calculation becomes the following: [15 000 (0.07 / 12)] / [1 - (1 + 0.07 / 12)
-36 ]. Each monthly repayment for this car loan would be $ 463.16.
Each repayment has a part that goes to interest and a part that goes to reducing the main debt. In the example, the first installment of the debtor would pay an interest rate of $ 87.50 ($ 15,000 x 0.07 / 12) and the principal of repayment Z375.66 USD ($ 463.16 USD - $ 87.50), leaving a car loan balance of $ 14,624.34 ($ 15,000 - $ 375.66). His second installment would pay for an interest of $ 85.31 ($ 14,624.340,07/12) and payment of principal amounts of $ 377.85 ($ 463.16 - $ 85.31), leaving the balance in the car of $ 14.246.49). Similar calculations continue until the entire debt is repaid.
A car loan amortization table shows the time period, the amount of each repayment, part of each repayment that goes to interest, a part that concerns a reduction in the amount of debt and an outstanding balance after each repayment until the entire debt is worthwhile. The amortization table of the car loan clearly shows that the outstanding balance decreases after each repayment and reduces the part that passes into paid interest, and increases the part that passes to the repayment of the loan. This makes the amortization cheaper to repay the car loan in comparison with the simpleogment, where the part that goes into interest remains the same for each installment.