Discover how paying a little extra builds equity faster and accelerates your journey to owning your car free and clear.
How Your Loan is Calculated
We break down the numbers behind your auto loan to show you exactly where your money goes and how extra payments can help you save.
Your Base Payment
We start with the standard loan formula used by most lenders to find your fixed monthly amount:
M = P × [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]- M = Monthly Payment
- P = Initial Loan Amount
- r = Monthly Interest Rate (Annual Rate ÷ 12)
- n = Total Number of Payments
Inside Your Payment
Each payment is split:
- A portion covers the interest charge (Current Loan Balance × r)
- The remainder pays down the principal balance
The Power of Paying Extra
Any additional payment, whether monthly or a lump sum, goes directly to reducing your principal. This creates a compounding benefit: a lower balance means less future interest, which helps you pay off the loan faster and save significantly.