Money Loan Interest Calculator
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Reviewed by Calculator Editorial Team
Calculate the interest on a loan with our money loan interest calculator. Understand how different interest rates and loan terms affect your total repayment amount.
How to Use This Calculator
To calculate loan interest, enter the loan amount, interest rate, and loan term in the calculator panel on the right. The calculator will show you the total interest paid and the total repayment amount.
For example, if you borrow $10,000 at 5% annual interest for 5 years, the calculator will show you how much interest you'll pay and the total amount you'll need to repay.
Formula Used
The interest on a loan is calculated using the simple interest formula:
Interest = Principal × Rate × Time
Where:
- Principal is the loan amount
- Rate is the annual interest rate (in decimal form)
- Time is the loan term in years
The total repayment amount is the sum of the principal and the interest:
Total Repayment = Principal + Interest
This calculator uses simple interest. For loans with compound interest, the formula is more complex and requires periodic compounding.
Worked Example
Let's calculate the interest on a $5,000 loan at 4% annual interest for 3 years.
- Principal = $5,000
- Rate = 4% = 0.04
- Time = 3 years
Using the formula:
Interest = $5,000 × 0.04 × 3 = $600
Total Repayment = $5,000 + $600 = $5,600
So, you would pay $600 in interest and a total of $5,600 over the 3-year loan term.
Types of Interest
There are two main types of interest: simple interest and compound interest.
Simple Interest
Simple interest is calculated only on the original principal amount. It's straightforward and easy to calculate.
Interest = Principal × Rate × Time
Compound Interest
Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. It results in higher total repayment amounts over time.
Amount = Principal × (1 + Rate/Compounding Periods)^(Rate × Time)
Interest = Amount - Principal
This calculator focuses on simple interest. For compound interest calculations, you would need a more advanced calculator.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original loan amount, while compound interest is calculated on the original amount plus any accumulated interest from previous periods. Compound interest typically results in higher total repayment amounts over time.
How do I calculate the monthly payment on a loan?
To calculate monthly payments, you need to use a loan amortization formula that takes into account the loan term in months, not years. This calculator focuses on simple interest, so monthly payments would require a different approach.
What factors affect the total interest paid on a loan?
The total interest paid depends on the loan amount, interest rate, loan term, and whether the interest is simple or compound. Higher rates, longer terms, and compound interest all increase the total interest paid.