Estimate your potential new monthly payment and total interest savings by refinancing your car loan.
Understanding Car Loan Refinancing
Refinancing a car loan involves replacing your existing auto loan with a new one, typically to secure more favorable terms. The primary goals are usually to lower your monthly payment, reduce the total interest paid over the life of the loan, or both. This calculator helps you estimate the potential financial impact of refinancing your current car loan.
How Car Refinancing Works
When you refinance, you essentially take out a new loan for the outstanding balance of your old loan. The new loan's terms (interest rate and repayment period) are determined by your creditworthiness, the vehicle's value, and current market conditions.
Key Metrics Calculated:
Current Total Interest Paid: This is the total amount of interest you would pay if you continue with your current loan terms.
New Total Interest Paid: This is the total interest you would pay with the proposed new loan terms.
Total Interest Savings: The difference between the current total interest and the new total interest, indicating how much you could save.
Monthly Payment Difference: The change in your monthly payment amount. This could be a decrease (savings) or an increase.
The Math Behind the Calculator
The calculator uses the standard loan amortization formula to determine monthly payments and total interest for both your current loan and the proposed new loan. The formula for the monthly payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P is the principal loan amount (your current loan balance).
i is the monthly interest rate (annual rate divided by 12).
n is the total number of payments (loan term in months).
Total Interest Paid is calculated as (Monthly Payment * Total Number of Payments) – Principal Loan Amount.
When Should You Consider Refinancing?
Improved Credit Score: If your credit score has significantly improved since you took out the original loan, you might qualify for a lower interest rate.
Lower Market Interest Rates: If prevailing interest rates have dropped, you may be able to get a better deal on a new loan.
Shortening Loan Term: You might want to refinance to a shorter term to pay off your car faster, even if the monthly payment increases slightly.
Increasing Loan Term: If you need to lower your monthly payments due to financial hardship, refinancing to a longer term might be an option, but be aware this usually increases the total interest paid.
Removing a Co-signer: If you originally had a co-signer and your credit has improved, you might be able to refinance to remove them from the loan.
Disclaimer: This calculator provides an estimate. Actual savings may vary based on lender fees, specific loan terms, and your individual financial situation. Always review all loan documents carefully before signing.
function calculateMonthlyPayment(principal, annualRate, termInMonths) {
var monthlyRate = (annualRate / 100) / 12;
var numberOfPayments = termInMonths;
if (monthlyRate <= 0 || numberOfPayments <= 0) {
return principal / numberOfPayments; // Simple division if no interest or term is invalid
}
var numerator = monthlyRate * Math.pow((1 + monthlyRate), numberOfPayments);
var denominator = Math.pow((1 + monthlyRate), numberOfPayments) – 1;
var monthlyPayment = principal * (numerator / denominator);
return isNaN(monthlyPayment) ? 0 : monthlyPayment;
}
function calculateTotalInterest(principal, monthlyPayment, termInMonths) {
if (isNaN(monthlyPayment) || monthlyPayment <= 0) return 0;
var totalRepayment = monthlyPayment * termInMonths;
var totalInterest = totalRepayment – principal;
return isNaN(totalInterest) || totalInterest < 0 ? 0 : totalInterest;
}
function formatCurrency(amount) {
return '$' + Math.round(amount).toLocaleString('en-US', { minimumFractionDigits: 0, maximumFractionDigits: 0 });
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById('currentLoanBalance').value);
var currentInterestRate = parseFloat(document.getElementById('currentInterestRate').value);
var currentLoanTerm = parseInt(document.getElementById('currentLoanTerm').value);
var newInterestRate = parseFloat(document.getElementById('newInterestRate').value);
var newLoanTerm = parseInt(document.getElementById('newLoanTerm').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = ''; // Clear previous results
// Input validation
if (isNaN(currentLoanBalance) || currentLoanBalance <= 0 ||
isNaN(currentInterestRate) || currentInterestRate < 0 ||
isNaN(currentLoanTerm) || currentLoanTerm <= 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(newLoanTerm) || newLoanTerm 0) {
message += 'Congratulations! You could potentially save ' + formatCurrency(totalInterestDifference) + ' in interest. ';
message += 'Your new estimated monthly payment is ' + formatCurrency(newMonthlyPayment) + ' (a change of ' + formatCurrency(monthlyPaymentDifference) + ').';
} else if (totalInterestDifference < 0) {
message += 'Refinancing may increase your total interest paid by ' + formatCurrency(Math.abs(totalInterestDifference)) + '. ';
message += 'Your new estimated monthly payment is ' + formatCurrency(newMonthlyPayment) + ' (a change of ' + formatCurrency(monthlyPaymentDifference) + ').';
} else {
message += 'Your total interest paid is estimated to remain the same. ';
message += 'Your new estimated monthly payment is ' + formatCurrency(newMonthlyPayment) + ' (a change of ' + formatCurrency(monthlyPaymentDifference) + ').';
}
resultDiv.innerHTML = message + 'Current estimated monthly payment: ' + formatCurrency(currentMonthlyPayment) + 'Current total estimated interest: ' + formatCurrency(currentTotalInterest) + '';
}