What is a Car Loan Calculator?
In simple terms, a car loan calculator is a special instrument used to estimate monthly payments on a new or used automobile loan. With this, you have the opportunity to create different scenarios, finding what works best for you. However, with this type of calculator you can also make comparisons to what different lenders offer, which helps when choosing the right bank, credit union, or finance company.
Using a Car Loan Calculator
The easiest and most convenient way to find a quality car loan calculator is by looking online. With this, you will discover multiple options available through various banks and other financial institutions. While the concept is much the same from one car loan calculator to another, there are often slight differences in how they look and function.
Although there different choices, two of the most comprehensive calculators provided online and free come from Bankrate and Capital One. Using either one of these calculators, you simply enter a few pieces of information and within a matter of seconds have the answers needed. The bottom line is that a car loan calculator will show you the exact amount of car you can afford according to a set budget.
For instance, if you were interested in purchasing a $20,000 vehicle with the loan spread out over a four-year period and at an interest rate of 7%, your monthly payment will be $478.92. However, if that amount is too far over budget, you can modify the numbers. In this case, you might look at stretching the loan out over six years, which drops the monthly payment to $340.98. Now, if you still need to pay less and can afford a $3,000 down payment, the $17,000 loan spread over six years reduces the monthly payment to $289.83.
By using a car loan calculator, you actually have more control when looking for the best loan. For instance, using the same scenario mentioned above, rather than come up with $3,000 for a down payment, you can begin looking for a lender that offers a lower interest rate. That too would affect the monthly payment.
Keep in mind that for the best interest rate, you need good credit. Of course, there are plenty of loans designed specifically for people with less-than-perfect credit but you really want the best credit score for locking into a low interest rate. To accomplish this, consider pulling your credit report from all three reporting agencies to see if there are any omissions, errors, or other problems having a negative impact on the FICO score.