# How To Use a Car Loan Payoff Calculator To Pay Off Your Debt

6 MIN READ

Published January 17, 2024 | Updated January 30, 2024

Expert Verified

If you have a car loan that you want to pay off sooner, you may be able to save a considerable amount of interest by doing so. Using a car loan payoff calculator can help you determine how soon you can pay off your loan by adjusting your monthly payments.

The calculator uses loan details, such as your outstanding loan amount, loan term, and additional payments, to calculate how many months it’ll take to pay off the loan. This is some of the necessary information to have on hand if you want to create a revised repayment plan for your car debt using a car loan payoff calculator.

## Why You Should Use an Auto Loan Payoff Calculator

Using a car loan payoff calculator can help you determine how soon you can pay off your loan by increasing your car loan payments, but is it worth it? Here are the key advantages of using the calculator and paying off your loan early.

### Helps You Save Time

Trying to manually calculate how much you need to pay each month to clear off your debt by a certain date can take a lot of time. It can also be a complex process due to the number of factors involved, such as your current APR, outstanding principal, and the extra amount you’re willing to pay.

Using an online car loan payoff calculator can help you save time by providing you with the details you want within seconds.

### Helps You Save Money

A major benefit of using an online payoff calculator is that it can help you save a considerable amount of money. A significant portion of what you pay towards your car loan goes to interest charges.This is especially true with longer terms.

For example, if you’re taking out a car loan of $20,000 for 60 months at an interest rate of 8.66%, your car payments will be $411. The total interest you’ll pay over the life of the loan will be $4712. If you borrow the same amount for a term of 84 months, your monthly payments will be $318, but the total interest you’ll pay will be $6,740.

**Towards the beginning of your term, interest makes up a large portion of your monthly payment.** When you pay off your loan early, it allows you to save a lot of money that you would otherwise pay for interest charges. Any extra payment you make on a car loan, other than your monthly installments, will go towards your principal. As your principal goes down, the interest you pay will also be lower. These savings can be significant if you have a higher loan rate.

## Import Factors to Consider When Using a Car Loan Payoff Calculator

When using a car loan payoff calculator, there are a number of factors that you need to consider. Understanding how car loans work and how these factors impact your overall payoff will help you determine the right repayment strategy.

Teressa Dodson, a financial expert and the founder of Greenbacks Consulting, offers some advice for consumers ready to calculate a loan payment. “Regardless of the loan terms and payoff, always consider the car’s sticker price and the interest rate you're paying,” says Dodson. “This will tell you if you're overpaying for the car over time. The last thing you want is to be in a position where when selling your car, you're upside down,” she cautions.

### Loan Amount

This is the total amount of money you borrow from the lender to purchase your car. The loan amount will be lower if you’re purchasing a used car. The loan amount you borrow is the new car's purchase price minus your down payment.

### Principal Balance

Your principal balance is the amount you currently owe to the lender to satisfy the loan payoff. This amount does not include interest and other charges included in your monthly payments.

### Interest Rates

Interest rate is the percentage that represents the price you pay when you borrow money to purchase a car. Your car payments will consist of interest as well as principal.

It’s important to note that the loan’s interest rate is different from the annual percentage rate (APR). **The APR is the total cost of borrowing** and includes the interest as well as any fees the lender charges.

### Loan Term

A loan term is the time period you’ll have to repay your loan. Car loan terms usually range from 24 to 84 months.

### Additional Payments

Additional payments refer to any amount of money you pay toward your car loan in addition to your monthly payments. Use any extra money you have to pay toward your car loan each month or make lump sum payments when you get a bonus, tax refund, or a windfall. **One of the easiest ways to pay off your loan sooner is by paying extra each month.**

Another option is to make a lump sum payment to pay off your loan early. However, this may not be possible for many borrowers.

## How To Use a Car Loan Payoff Calculator

Using an online car payment calculator is easy and straightforward. Follow the steps we’ve listed below:

- Start by selecting an online calculator you’re comfortable using.
- Input details of your loan, such as the loan amount, interest rate, loan term, number of months remaining, and additional monthly payments.
- Based on the information you provide, the calculation results will provide information about how many months you’ll shave off your term and how much you’ll save in interest.

Let’s consider an example to understand how loan payoff works.

**Loan balance:** $20,000

**Length of the loan:** 60 months

**Number of months remaining:** 48 months

**Loan interest rate:** 7%

**Current payment:** $396.02

**Additional payment amount:** $200/month

With this example, an extra $200/month will allow you to pay off the loan 29 months sooner, and you’ll be able to **save $915 in interest charges.**

## Use a Car Loan Calculator To Pay Off Your Debt Faster

Using a car debt payoff calculator is an easy way to determine the right repayment strategy to pay off your loan sooner. Anything extra you can pay toward your debt helps, even if it’s a small amount. Be sure to check your loan agreement to see if there’s a prepayment penalty before you pay off the loan.

Once you pay off your loan, you’ll free up money that you can use either to save for a down payment on a new vehicle, to save for emergencies, or for planned expenses in the future.