Tips for paying off your car loan quickly

For those who are about to buy a new car, an important factor that must be taken into consideration when making a decision is the car interest rate in order to plan the installment payments appropriately. This article will tell you how to calculate car interest and techniques for planning car installment payments to make your finances smooth and not stuck. Let's find out.

Terms you should know...before calculating interest

Down payment

The down payment is the first lump sum that the car buyer must pay to the car seller. After deducting the down payment from the car price, the remaining amount will be used to finance with a financial institution.

Finance

Finance is to apply for a loan or borrow money from a financial institution to buy a car. The borrower then pays the car installments with interest to the financial institution on a monthly basis, according to the agreed period and rate.

Amount of finance

The amount of finance is the remaining amount after deducting the down payment or the amount borrowed from the finance company to buy a car. This amount will be calculated together with the interest and used as the installments that the borrower must pay each month.

Fixed interest

Fixed interest is the interest rate calculated on the finance amount that does not increase or decrease. It is an interest rate that the payer must pay the same amount in every installment. From the first installment to the last installment

Reducing principal interest
Reducing principal interest is the calculation of car interest from the remaining principal each day. If the remaining principal is low, the interest rate will also decrease.

Car installment calculation formula and car interest calculation method
For the car interest calculation method to find the car installment amount, it can be done by calculating in the following order:

Car price - Down payment = Finance amount
Finance amount x Interest rate = Annual car installment interest
Annual car installment interest x Number of years to be paid = Total interest to be paid
Finance amount + Total interest to be paid = Total amount to be paid
Total amount to be paid ÷ Number of months to be paid = Monthly installment

Example

Mr. A bought a car with a total price including additional expenses of 2,000,000 baht, made a 40% down payment, the bank offered an interest rate of 6% per year, and wanted to pay for the car over a period of 48 months or 4 years. The monthly installment rate can be calculated as follows:

2,000,000 - 800,000 = 1,200,000
1,200,000 x 6% = 72,000
72,000 x 4 = 288,000
1,200,000 + 288,000 = 1,488,000
1,488,000 ÷ 48 = 31,000
To sum up, the car installment payment rate is 31,000 baht.

5 tips for flexible car installments

Pay a large down payment

The down payment is the first lump sum that must be paid to pay for the car. Therefore, if you pay a large amount, you will be able to borrow less money, which will reduce the installment rate and interest that must be paid each month.

Choose the shortest installment period.

The installment period has a direct effect on the amount of interest that must be paid. The longer the installment period, the more interest will be paid. Therefore, you should choose a short installment period to save as much interest as possible. Even though you have to pay a high monthly installment, in the long run, your debt burden will decrease faster.

Pay on time.

The important thing for those who have to pay for car installments is to plan your income and expenses well in order to have money to pay the installments on time every month. Because if you postpone or miss the payment, you will have to pay additional fines and interest, which will result in unnecessary additional expenses.

Avoid creating more debt.

While you still have to pay for the car installment, you should avoid creating additional debt, whether it is a personal loan, cash card or other loans, because it risks accumulating debt, lacking liquidity and may be at risk of default.

Have a lump sum, quickly pay it off.

If you have a lump sum, whether it is a bonus from work, investment returns or other additional income, you should use that money to pay for the additional car installment. To help reduce the principal and interest, and also make it easier to pay off debt faster, now that you know how to calculate car interest, it's time to choose the right car. For those interested in buying a used Honda car, which is a good condition family car, Autovilla has many models to choose from. It has also passed the inspection with standards certified by Japan. Guaranteed no major collisions, cuts, flooding or rollovers, 100% transfer of ownership.

For more information, please contact

Srinakarin branch, Tel. 097-921-9552

Romklao branch, Tel. 095-906-0633

Lam Luk Ka branch, Tel. 092-940-5098

Reference:

What do you need to know if you want to pay for a car in installments? Retrieved on May 20, 2024 from https://www.set.or.th/th/about/setsource/insights/article/380-car-loan