How to use the car loan calculator with balloon
Loan amount
The amount of money you will be taking out under a car loan agreement. This is often simply the vehicle's purchase price, minus any deposit or trade-in amount. If you are borrowing extra to cover other purchase costs (like delivery) or ongoing costs (like car insurance) be sure to factor that in too.
Interest rate
This is the fixed car loan interest rate the lender applies, and is used to calculate both the total amount of interest you will pay over the loan period and your scheduled repayment amount. Remember, interest rates are usually lower on secured car loans but tend to be higher for used cars and borrowers with bad credit.
Loan term
The length of your car loan as outlines in your loan agreement. The loan term is important as it will allow you to accurately calculate your monthly, fortnightly, or weekly payments through an Annual Percentage Rate (APR) calculation. The shorter your loan term, the higher your scheduled repayments will be. But you'll pay less in interest overall with a shorter term.
Establishment fees
Any upfront fees charged by the lender on the loan. Establishment fees are included in the calculation for your repayments to provide a more accurate total loan amount.
Balloon Payment
Any balloon payment or residual value as a dollar amount or a percentage.
How is my balloon payment calculated?
If you decide on a car loan with a balloon payment, the balloon payment amount will be set by your lender. Although you may be able to negotiate on the level of the payment.
The balloon payment is usually calculated based on what the lender estimates the remaining (or residual) value of the vehicle will be at the end of the loan term.
It will take into account vehicle depreciation. Or in other words the level at which it will fall in value due to wear and tear and other factors.
The balloon payment level can either be calculated as a dollar amount or it may be a standard percentage of the car's value/loan amount set by the lender. It's usually somewhere in the region of 30-40% of the vehicle's value.
It's usually thousands of dollars, so many borrowers opt to refinance the balloon amount at the end of the finance term.
Car loan repayment calculator with balloon interest formula
The car loan calculator with balloon payment uses an amortisation calculation.
This calculation takes into account the way you will gradually repay your loan amount over time, meaning the amount of interest charged gradually decreases.
It means at the start of the loan a large proportion of your repayments are going towards paying off interest. As the loan balance decreases over time, you pay off more of the actual loan amount (known as the principal).
The car loan calculator with balloon also takes account of the balloon payment amount, which remains the same during the term of the loan as it is not repaid until the end.
You are generally still charged interest on the full loan amount (including the balloon amount) throughout the life of the loan.
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