How to Calculate Car Loan Interest and Instalment

Taking up a car loan (also known as hire purchase) is the most common approach when buying a car. In this article, we’ll show you how simple it is to calculate your monthly interest and instalment for a conventional car loan in Malaysia. All you need is a calculator and you’re good to go!

2 Easy Steps to Calculate Car Loan Interest and Instalment

First, determine the values of the loan amount, loan period and interest rate of your car loan, as follow:

Loan Amount = A
Total Loan Period = B (years)
Interest Rate = C

Now, use the following formulas to determine the total interest, monthly interest and monthly instalment of your car loan:

Your Total Interest = C/100 x A x B = X
Your Monthly Interest = X / (B x 12)
Your Monthly Instalment = (A + X) / (B x 12)

Let’s Put This Into Practice, Shall We?

Example:
Say you have a car loan amount of RM50,000 at a flat interest rate of 2.5% to be paid over 5 years

Loan Amount = 50,000
Total Loan Period = 5
Interest Rate = 2.5
Your Total Interest = 2.5/100 x 50,000 x 5 = RM6,250
Your Monthly Interest = 6,250 / (5 x 12) = RM104.17
Your Monthly Instalment = (50,000 + 6,250) / (5 x 12) = RM937.50

Take note that the above calculation is based on a flat interest rate for the full loan amount over the entire loan period. In Malaysia, most conventional car loans use this method of calculation.

Posted in: car loan