If you are in the market for a new or used car but can't afford to buy it outright, you are certainly not alone. Most car buyers need to finance their purchase through a loan and, because of that, there is no shortage of car loan providers. Whether you decide to loan through a bank, building society, credit union, dealership, or e-lender, you first need to know how much you can afford to pay each month. Once you have worked that out, you can start to think about interest rates. Unfortunately, unless you are borrowing money from a very generous friend, you will be charged interest on top of your loan amount – that's the principle way lenders make their money. The interest rate that you are charged depends greatly on your credit rating, current interest rates, the lender you borrow through and the down payment you make, but knowing the maximum interest rate you can afford will help you know whether or not you can accept a loan. This is exactly when a car loan interest calculator can be invaluable.
Enter in the figure you wish to borrow (ensuring you remember to deduct any amount that you intend to use as a down payment), the length of the term and the interest rate you decide to start with. If the monthly repayments the car loan interest calculator shows is more than you can afford, enter a lower rate until you come to a figure that is right for you. Of course, you have to be realistic. If you end up with an interest rate so low that you will never be offered it, you need to rethink. Either you increase the down payment, increase the term of the loan (you will pay more in interest in the long term but your monthly payments will be more manageable and you can always pay more off at a later date), wait until you have saved up more money, or perhaps look at buying a more affordable car.