Borrow Money Interest Calculator
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Reviewed by Calculator Editorial Team
When you borrow money, you pay interest on the principal amount. This calculator helps you determine how much interest you'll pay over time based on the loan amount, interest rate, and term.
How to Use This Calculator
To calculate the interest on a borrowed amount:
- Enter the loan amount (the principal you're borrowing)
- Enter the annual interest rate (APR)
- Select the loan term in years
- Click Calculate to see the results
The calculator will show you the total interest paid and the total repayment amount. You can also view a chart showing the interest breakdown over time.
Formula Explained
The interest on a borrowed amount is calculated using the simple interest formula:
Interest = Principal × Rate × Time
- Principal (P) - The amount of money borrowed
- Rate (R) - Annual interest rate (in decimal form)
- Time (T) - Loan term in years
For example, if you borrow $10,000 at 5% annual interest for 3 years:
Interest = $10,000 × 0.05 × 3 = $1,500
This means you'll pay $1,500 in interest over the 3-year period.
Worked Examples
Example 1: Personal Loan
You take out a $5,000 personal loan at 6% annual interest for 2 years.
Interest = $5,000 × 0.06 × 2 = $600
You'll pay $600 in interest, making the total repayment $5,600.
Example 2: Car Loan
You finance a $20,000 car loan at 4.5% annual interest for 5 years.
Interest = $20,000 × 0.045 × 5 = $4,500
You'll pay $4,500 in interest, making the total repayment $24,500.
Comparison Table
| Loan Amount | Interest Rate | Term (Years) | Interest Paid |
|---|---|---|---|
| $10,000 | 5% | 3 | $1,500 |
| $5,000 | 6% | 2 | $600 |
| $20,000 | 4.5% | 5 | $4,500 |
Frequently Asked Questions
What is the difference between simple interest and compound interest?
Simple interest is calculated only on the original principal amount, while compound interest is calculated on the principal plus any accumulated interest from previous periods. This calculator uses simple interest.
How is the annual interest rate determined?
The annual interest rate (APR) is determined by the lender and can vary based on your credit score, loan type, and market conditions. It's important to compare rates from different lenders.
Can I use this calculator for mortgage loans?
This calculator uses simple interest, which is typically used for personal loans. Mortgages usually use compound interest, so you may need a different calculator for accurate mortgage calculations.