An Auto Finance Amount Calculation Procedure

Nowadays, apart from the estimated monthly installments, many lending experts are suggesting their clients to also amortize what sort of amount they should borrow on auto finance. Some consultants do it for the clients and the following lines present an idea on what calculations are done to find out the auto finance amount. Let the installment that the borrower is comfortable with equal to five hundred dollars. This is usually calculated by taking one fifth or one fourth portion of the income of the applicant and setting it aside for auto finance installments. Let the interest charged on the loan be equal to ten percent in this scenario but it should be changed to get a range of the auto finance amount.

The next thing is the term of the loan which is usually 24 to 84 months. Let the term for this loan is 60 months. This term has to be multiplied with the amount being taken as installment. In this case, the amount comes out to be thirty thousand dollars. Now, the interest amount should be reduced for the whole of the term that is five years. The interest amount in this scenario is half of principal and the total of interest and principal is equal to 30000 dollars. This shows that the principal amount in this scenario is twenty thousand dollars.

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