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5 Factors Impacting Auto Loan Amortization

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Car loan amortization is the schedule that impacts how your car loan is paid off. As noted by the loan experts at Lantern by SoFi, “When a buyer uses financing to purchase a vehicle, the lender or financing company should provide that buyer with an auto loan amortization schedule. This schedule explains how the loan payments are applied over time.”

However, there are many factors that can actually impact that schedule. Here’s a look at five of them.

Down Payment

No one likes putting down money on a car payment, but there are many positives of doing so. The larger the down payment, the smaller your loan will be. 

This can alter your loan amortization schedule, as it can enable you to potentially pay off your car loan faster or lower the total amount of your down payments. 

Furthermore, sometimes, a higher down payment can lower your interest rate, as a larger down payment can lower the risk to the bank.

Fees & Taxes

Depending on the specifics of where you live and the type of loan you take out, you may be able to fold in your fees and taxes into your overall loan. This may allow you to extend the time in which you have to pay your fees and taxes, but depending on the amortization schedule, it may also mean that you pay more in the long run.

Interest Rate

It goes without saying that the interest rate is hugely important to the overall amortization schedule, as compounding interest will add to the overall amount of interest payments that you may have. 

Furthermore, how the interest is calculated can be absolutely critical to your amortization schedule. In some instances – depending on the specifics of the loan – making an extra payment, or paying twice a month, can decrease the amount of interest you pay.

Length of Loan


The terms of the loan – meaning the time in which you have to repay it – can make a huge difference on your overall amortization schedule. Longer loans usually come with lower monthly payments, but you’ll pay more overall since interest costs will add up. 

On the other hand, shorter loans mean higher monthly payments, but less overall interest paid. Furthermore, the loan will be paid off quicker.

Your Credit Score

At the root of all loans is your credit score. The higher your credit score, the lower the risk your bank or lending institution will perceive you to be. As a result, you will get more favorable loan terms and likely get lower interest rates. This, in turn, will lead to reduced payments. However, it is important to understand how loan amortization works because you can usually get a loan under any circumstances – even if you have bad credit.

These five factors are critically important to determining your loan amortization schedule. Keep this in mind as you go car shopping, and make sure you fully understand the terms of any loan that you take out. 

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