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3 Ways to Calculate Interest Payments, how to calculate interest on a loan.#How #to #calculate #interest #on #a #loan


How to Calculate Interest Payments

Not all loans are created equal. Understanding how to calculate a monthly payment, as well as the amount of interest you’ll pay over the life of the loan, are very helpful in choosing the perfect loan for you. Understanding exactly how the money adds up can requires you to work with a complex formula, but you can also calculate interest more simply using Excel.

Steps Edit

Method One of Three:

Quickly Comprehending Your Loan Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Method Two of Three:

Calculating your Payment by Hand Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Method Three of Three:

Calculating your Interest with Excel Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Community Q A

  • Calculate the first six months of interest at that rate and add it to the principal. Then, continue your calculation using this amount with the adjusted rate of interest.
  • Typically when you miss a payment the monthly payment amount does not change, but you will be charged a late fee which could be a fixed amount or an amount per day until the payment is made. However, if you do need to calculate the interest on missed payments, you would add the principal amount from the payments you missed and then use that amount in your calculation with the monthly interest rate. A loan amortization schedule will show you exact breakdown of principal to interest for each payment.
  • A line of credit is not a loan, but the lender’s agreement to provide a loan under certain conditions specified in the line of credit agreement. Lenders usually charge fees for a line of credit since it restricts their lending capacity. However, a line of credit until funded does not provide any cash to repay another loan. As a consequence, it appears that you will need to make a loan to pay off an older loan.
  • An interest payment is based upon the annual interest rate and the principal amount outstanding for the period. Presuming that you are making interest payments only on a term loan, divide the interest rate stated in the loan documents by the number of payments made in a year. Multiply the result times the principal outstanding. For example, if you have a $10,000 loan at 10% interest, your annual interest payments would total $1,000. If you make quarterly payments, you would pay $250 each quarter.
  • The ”total” monthly payment (including principal) would depend on the length of the loan. Using “simple” interest, the monthly interest payment would be roughly $85.
  • This gives you a monthly payment of $17,548.56, using the calculations given in this article. Multiply by 24 payments and you are paying a total of $421,165.44. Subtract that from the original $400,000, and you’re paying a total interest of $21,165.44. Your average monthly interest paid would be around $881.90.
  • Calculate the interest payments normally, but exclude the irregular ones and add them at the end. For example, if interest is £10 per month for 12 months, but one month it was 9 and one month it was 16, you’d calculate the 10 normal months and add the two irregulars at the end.
  • Start with the outstanding balance on the loan at the beginning of the current year. Multiply that balance by the loan’s APR (interest rate). Divide that number by 12. That is how much interest you pay in one month.
  • Leaving aside the complicating question of compound interest (by which your friend would owe you additional interest on all the unpaid interest), you would simply multiply $2500 by 53%. That’s how much interest your friend owes you at this point, in addition to whatever portion of the original principal you expected to get back by now (probably the whole thing!). 1% of $2500 is $25. That makes the calculation easy: your friend owed you $25 in interest every month, or a total of $1,325 over the period of 53 months, plus the original $2500. $25 continues to be added on every month.
  • That’s 3 percent each year for five years, which amounts to 15 percent simple interest over the whole period. In terms of compound interest, it would be more than that, depending on how often the interest is compounded.

Reusable Spreadsheet to Calculate Interest Payments Edit

The following table details how to use Excel, Google Docs, or similar spreadsheet programs to calculate simply interest payments on anything. Simply fill it in with your own numbers. Note that, where it says F x = <\displaystyle Fx=>, you must fill this part in the upper bar of the spreadsheet labeled “Fx.” The numbers (A2, C1, etc.) correspond to the boxes as they are labeled in Excel and Google Docs.


How to Calculate a Down Payment for a Car: 15 Steps, calculate car payment.#Calculate #car #payment


How to Calculate a Down Payment for a Car

Buying a car can be daunting, with the moving parts of finding a car you like, securing financing, and getting rid of your old vehicle if you have one. Knowing how much a down payment for a car you are interested in is a key element of decision making when you are on the market for a new automobile.

Steps Edit

Method One of Two:

Borrowing from a Dealer Edit

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Method Two of Two:

Borrowing from a Bank or Credit Union Edit

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment

Calculate car payment


Financial Calculator, Free Online Calculators from, calculate car payment.#Calculate #car #payment


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How do I Calculate Mortgage Payments in Excel, Home Guides, SF Gate, calculate car payments.#Calculate #car #payments


How do I Calculate Mortgage Payments in Excel?

When you take out a fixed-rate mortgage to buy or refinance a home, your lender takes three numbers and plugs them into a formula to calculate your monthly payment. Those three numbers are your principal, or the amount of money you re borrowing; your interest rate; and the number of months in your loan term. You can quickly create a spreadsheet in Microsoft Excel to perform the calculation for you–and, in the process, gain a greater understanding of just how a mortgage loan works.

Launch Microsoft Excel. Open a new workbook by pressing “Ctrl” and “N.”

Type “Principal” into cell A1 on the Excel worksheet. Type “Rate” into cell A2. Type “Months” into cell A3.

Enter the amount of the mortgage principal in cell B1.

Enter the interest rate in cell B2. Just enter the number; don’t use the percent sign. So, if your rate is 7 percent, just enter 7. If it’s 5.75 percent, enter 5.75.

Enter the number of months in the loan term in cell B3. Most mortgages are for either 15 or 30 years. Enter 180 for a 15-year mortgage or 360 for a 30-year loan. If your loan is for some other number of years, simply multiply that number by 12 and enter the result in cell B3.

Enter the following formula in cell A4, beginning with the “equals” sign: =B2/1200 This converts your annual interest rate to a decimal figure by dividing it by 100, then breaks it down into a monthly rate by dividing it by 12.

Enter the following formula in cell A5, beginning with the “equals” sign: =(1+A4)^B3 This step takes into account the compounding of the interest over the life of the loan.

Enter the following formula in cell A6, beginning with the “equals” sign: =(A4*A5)/(A5-1) This takes all the data and boils it down to a multiplier that’s applied to your principal to determine your monthly payment.

Enter the following formula in cell A7, beginning with the “equals” sign: =A6*B1 This applies the multiplier to your loan principal.

Right-click on cell A7 and select “Format Cells.” Set the formatting to “Currency.” Set “Decimal Places” to 2. Set the “Currency Symbol” to the dollar sign. Click “OK.” This cell now gives you the amount of your mortgage payment based on your principal, interest rate and loan term.

Things You Will Need

  • Microsoft Excel
  • Experiment with different principal amounts, interest rates and loan terms just by changing the values in cells B1, B2 and B3. The total payment in cell A7 will change to reflect the new figures.

Warning

  • Most lenders require that you pay your property taxes and homeowners’ insurance premiums on a monthly basis, with 1/12 of the total tacked on to each mortgage payment. Those amounts are not included in this calculation. The result in cell A7 includes only the amount that goes to your lender–the total principal and interest due each month.

References (2)

About the Author

Calculate car payments

Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.


How to Calculate Total Interest Paid on a Car Loan: 15 Steps, how to calculate interest on a loan.#How #to #calculate #interest #on #a #loan


How to Calculate Total Interest Paid on a Car Loan

There are several components that are used to compute interest on your car loan. You need to know the principal amount owed, the term of the loan, and the interest rate. Most car loans use an amortization schedule to calculate interest. The formula to compute amortization is complicated, even with a calculator. Car buyers can find amortization calculators on the web. If your car loan uses simple interest, you can use the calculator to determine your monthly payment amount.

Steps Edit

Part One of Three:

Defining Car Loan Terms Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Part Two of Three:

Computing Your Total Interest Using an Online Calculator Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Part Three of Three:

Computing Total Interest Using The Simple Interest Formula Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan


Financial Calculator, Free Online Calculators from, calculate car payment.#Calculate #car #payment


Calculator

Use our financial calculators to finesse your monthly budget, compare borrowing costs and plan for your future.

Select a product below to begin calculating:

Mortgage Calculators

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Credit Card Calculators

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Savings Calculators

College Calculators

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High Yield CD and MMA Rates

Other Rates

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Financial Calculator, Free Online Calculators from, calculate loan payments.#Calculate #loan #payments


Calculators

Use our financial calculators to finesse your monthly budget, compare borrowing costs and plan for your future.

Mortgage Calculators

Auto Calculators

Credit Card Calculators

Home Equity Calculators

Investment Calculators

Retirement Calculators

Savings Calculators

College Calculators

1 Tools. Master Life’s Financial Journey.

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Our tools, rates and advice help no matter where you are on life’s financial journey.

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Car Loan EMI Calculator India – Calculate Auto Loan Monthly Payments, calculate car payments.#Calculate #car #payments


EMI Calculator

Auto Loan EMI Calculator

Nowadays, owning a car is no longer seen as a luxurious commodity, rather it has become a necessity. If you have plans to purchase your dream car, it is not important to burn a hole in your pocket in the process. Instead, you can go for the option of having a car loan. The best part of having a car loan is that with the help of reasonable EMIs you get to pay back the loan.

Are you confused about the whole concept of EMI and the interest you have to pay? You don’t need to and let Car Loan EMI Calculator handle this. Read on, to know more about the EMI Calculator for a car loan and various other related things.

Car Loan EMI calculator

Calculate car payments

What you should know about Car Loan Monthly Payment Calculator ?

An EMI loan calculator will help you out in making a right decision for the car model and the monthly budget. So, here are the key factors that you should know about this Loan EMI Calculator –

  • EMI calculator for Car Loan is one of the helpful tools that will make you familiar with the existing and the future monthly amount paid as installments. You can have a Car Loan EMI Calculator from the banks and financial entities.
  • While using an EMI Car loan Calculator, there is a need to enter certain details such as repayment term, loan amount, and the interest rate. With the help of this calculator, you can easily get familiar with the monthly installments and amortization schedule.
  • For using an EMI Calculator for auto Loan, you can enter the processing fee as well. The same fee also gets added to your loan amount to show the total expense incurred.
  • This Car Loans EMI Calculator online will also assist you with the amortization plan, interest outgo, and timeline of the loan repayment. Such information will make you aware of all the important information that helps you make smart decisions.
  • An EMI Calculator also comes handy in planning your monthly budget. This will really help in making the EMI more affordable.

Calculate car payments

How Does Online Car Loan EMI Calculator work?

First and foremost, the compound interest on the principal loan amount at the set interest rate gets calculated by this EMI Calculator. The calculation is done as per the following rule – paying the interest part first, the total amount payable, and the part that outstanding of your EMI is the principal. EMI is computed using the following emi calculation formula –

Monthly Installment Amount = [P x R X (1 + R) ^ N] / [ (1 + R) ^N 1]

In the formula, P is the principal amount; N signifies the number of monthly installments, and R is the rate of interest every month. Let us assume the interest rate per annum at 12%, the interest rate each month will be 12/ (12 100).

How can you simplify your car loan with an EMI Calculator?

When you want to have the best information about making a right choice for a loan or about the repayments, this Calculator will do all the things for you. Following are some of the main things that get simplified when you use this Calculator for car loan.

  • Being intuitive and easy to use are its key elements. The main idea behind designing the calculator is to make your calculation task easier. All you need is to enter the values and use the sliders and you will have the instant projections on EMI and amortization schedule.
  • Using this Calculator is as simple as using a standard calculator. You don’t need to have special expertise to use this calculator.
  • With the help of the Calculator, you will have the amortization schedule and above all the breakup of the payable amount in a graphic format makes the things easier to understand and interpret.
  • You can use this Calculator number of times until the time you have the right combination of term, affordable EMI, and the principal.
  • With the help of a online EMI Calculator, you get to know which car loan will be beneficial for you. You get to compare the interest rates based on the prepayment penalty, interest rates, and processing fee to check its effects on the EMI.
  • You don’t have to pay anything and you will get your results instantly.

What are the benefits of using a car loan eligibility calculator?

This online Loan Calculator for determining car loan payments is a handy tool that will help you make smart loan decisions. Let us discuss the benefits of this Calculator –

Reiterate Calculations –

Using this EMI Calculator for Car Loan, you can keep on varying the values till the time you have the right EMI value that suits you best. Using this calculator, you can also experiment with the interest rates and term of the car loan; you also get to know all these elements can affect your EMI.

Immediate Results –

One of the best things is that you get instant results when you calculate your EMI using Car Loan Calculator. You can also use this calculator before taking a final decision on taking a car loan, when you are finally paying off your loan, and while you are making plans for car loan repayments.

Logical evaluation of car loans –

With the help of this EMI calculator, you can easily compare the best car loans on the basis of key elements like – interest rate and EMI. You may feel that the interest rates are all same but using Car Loan Calculator, you will get a better idea of the interest rates that can prove beneficial to you.

Accurate –

With the help of online Car Loan Calculator, you get to save your efforts on calculating complicated compound interest. If you are planning to do manual calculations, you are bound to make mistakes. If you enter all the details in a Car Loan EMI online calculator, your task gets done in minutes. Having an intuitive interface, the Calculator can be used by anyone.

How to qualify for a car loan?

Well, you don’t need to worry as the process of auto loan approval is simpler as compared to the house loan. For your bank and the lenders, your credit history and income really plays a pivotal role. Basically, they are interested in knowing whether you will be able to repay the loan amount or not. Following are the things that a lender or your bank will consider –

Credit Score –

Your bank and lenders will show more interest in knowing your status regarding your credit health and even want to know your history. They are usually looking for a credit score i.e. more than 750. Basically, it is the first step and on the basis of your credit score, they will move on to the next step.

But, if your score is below 750, your application will not be considered for the car loan. For lenders or your bank having a credit score below 750 is a clear signal that you are not capable of managing your credit responsibly. So, if you don’t want to face a rejection, make sure you have a healthy credit score.

Employment Profile –

Your bank and your lenders will also show interest in knowing your employment status i.e. whether you have a stable employment or not. This will ensure them whether you are in a position to repay the loan amount. They are not sure if you have s stable employment where you can easily make the EMI monthly payments for a car loan. They check whether you have worked with an employer for a minimum of one year when you apply for the car loan.

Credit Report –

Just like your credit score shows the status of your credit health, your credit report shows your credit behavior. Even your current score is healthy, your bank can cross-check your credit report to have a look at your past payment history.

Existing EMI payments –

If your existing EMI liabilities is forming a high percentage of your income, your bank will have an idea that you are not in a position to maintain additional debt payments. If your total monthly EMI is over 50%-60% of your income, your lender will get skeptical about repaying the additional car loan. You have more chances of your loan application getting rejected.

Therefore, when you have decided to apply for the car loan, ensure that your EMI outflow is not more than your income percentage. Just in case it is high, make sure you pay off the smaller loans in order to bring down your overall EMI. This will help in freeing up some part of your income so that you can repay your car loan.

Besides Car Loan EMI Calculator, you also have easy access to various other EMI calculators like Home Loan EMI Calculator, Bike Loan EMI Calculator, and Personal Loan EMI Calculator.


Car Loan EMI Calculator India – Calculate Auto Loan Monthly Payments, calculate car loan.#Calculate #car #loan


EMI Calculator

Auto Loan EMI Calculator

Nowadays, owning a car is no longer seen as a luxurious commodity, rather it has become a necessity. If you have plans to purchase your dream car, it is not important to burn a hole in your pocket in the process. Instead, you can go for the option of having a car loan. The best part of having a car loan is that with the help of reasonable EMIs you get to pay back the loan.

Are you confused about the whole concept of EMI and the interest you have to pay? You don’t need to and let Car Loan EMI Calculator handle this. Read on, to know more about the EMI Calculator for a car loan and various other related things.

Car Loan EMI calculator

Calculate car loan

What you should know about Car Loan Monthly Payment Calculator ?

An EMI loan calculator will help you out in making a right decision for the car model and the monthly budget. So, here are the key factors that you should know about this Loan EMI Calculator –

  • EMI calculator for Car Loan is one of the helpful tools that will make you familiar with the existing and the future monthly amount paid as installments. You can have a Car Loan EMI Calculator from the banks and financial entities.
  • While using an EMI Car loan Calculator, there is a need to enter certain details such as repayment term, loan amount, and the interest rate. With the help of this calculator, you can easily get familiar with the monthly installments and amortization schedule.
  • For using an EMI Calculator for auto Loan, you can enter the processing fee as well. The same fee also gets added to your loan amount to show the total expense incurred.
  • This Car Loans EMI Calculator online will also assist you with the amortization plan, interest outgo, and timeline of the loan repayment. Such information will make you aware of all the important information that helps you make smart decisions.
  • An EMI Calculator also comes handy in planning your monthly budget. This will really help in making the EMI more affordable.

Calculate car loan

How Does Online Car Loan EMI Calculator work?

First and foremost, the compound interest on the principal loan amount at the set interest rate gets calculated by this EMI Calculator. The calculation is done as per the following rule – paying the interest part first, the total amount payable, and the part that outstanding of your EMI is the principal. EMI is computed using the following emi calculation formula –

Monthly Installment Amount = [P x R X (1 + R) ^ N] / [ (1 + R) ^N 1]

In the formula, P is the principal amount; N signifies the number of monthly installments, and R is the rate of interest every month. Let us assume the interest rate per annum at 12%, the interest rate each month will be 12/ (12 100).

How can you simplify your car loan with an EMI Calculator?

When you want to have the best information about making a right choice for a loan or about the repayments, this Calculator will do all the things for you. Following are some of the main things that get simplified when you use this Calculator for car loan.

  • Being intuitive and easy to use are its key elements. The main idea behind designing the calculator is to make your calculation task easier. All you need is to enter the values and use the sliders and you will have the instant projections on EMI and amortization schedule.
  • Using this Calculator is as simple as using a standard calculator. You don’t need to have special expertise to use this calculator.
  • With the help of the Calculator, you will have the amortization schedule and above all the breakup of the payable amount in a graphic format makes the things easier to understand and interpret.
  • You can use this Calculator number of times until the time you have the right combination of term, affordable EMI, and the principal.
  • With the help of a online EMI Calculator, you get to know which car loan will be beneficial for you. You get to compare the interest rates based on the prepayment penalty, interest rates, and processing fee to check its effects on the EMI.
  • You don’t have to pay anything and you will get your results instantly.

What are the benefits of using a car loan eligibility calculator?

This online Loan Calculator for determining car loan payments is a handy tool that will help you make smart loan decisions. Let us discuss the benefits of this Calculator –

Reiterate Calculations –

Using this EMI Calculator for Car Loan, you can keep on varying the values till the time you have the right EMI value that suits you best. Using this calculator, you can also experiment with the interest rates and term of the car loan; you also get to know all these elements can affect your EMI.

Immediate Results –

One of the best things is that you get instant results when you calculate your EMI using Car Loan Calculator. You can also use this calculator before taking a final decision on taking a car loan, when you are finally paying off your loan, and while you are making plans for car loan repayments.

Logical evaluation of car loans –

With the help of this EMI calculator, you can easily compare the best car loans on the basis of key elements like – interest rate and EMI. You may feel that the interest rates are all same but using Car Loan Calculator, you will get a better idea of the interest rates that can prove beneficial to you.

Accurate –

With the help of online Car Loan Calculator, you get to save your efforts on calculating complicated compound interest. If you are planning to do manual calculations, you are bound to make mistakes. If you enter all the details in a Car Loan EMI online calculator, your task gets done in minutes. Having an intuitive interface, the Calculator can be used by anyone.

How to qualify for a car loan?

Well, you don’t need to worry as the process of auto loan approval is simpler as compared to the house loan. For your bank and the lenders, your credit history and income really plays a pivotal role. Basically, they are interested in knowing whether you will be able to repay the loan amount or not. Following are the things that a lender or your bank will consider –

Credit Score –

Your bank and lenders will show more interest in knowing your status regarding your credit health and even want to know your history. They are usually looking for a credit score i.e. more than 750. Basically, it is the first step and on the basis of your credit score, they will move on to the next step.

But, if your score is below 750, your application will not be considered for the car loan. For lenders or your bank having a credit score below 750 is a clear signal that you are not capable of managing your credit responsibly. So, if you don’t want to face a rejection, make sure you have a healthy credit score.

Employment Profile –

Your bank and your lenders will also show interest in knowing your employment status i.e. whether you have a stable employment or not. This will ensure them whether you are in a position to repay the loan amount. They are not sure if you have s stable employment where you can easily make the EMI monthly payments for a car loan. They check whether you have worked with an employer for a minimum of one year when you apply for the car loan.

Credit Report –

Just like your credit score shows the status of your credit health, your credit report shows your credit behavior. Even your current score is healthy, your bank can cross-check your credit report to have a look at your past payment history.

Existing EMI payments –

If your existing EMI liabilities is forming a high percentage of your income, your bank will have an idea that you are not in a position to maintain additional debt payments. If your total monthly EMI is over 50%-60% of your income, your lender will get skeptical about repaying the additional car loan. You have more chances of your loan application getting rejected.

Therefore, when you have decided to apply for the car loan, ensure that your EMI outflow is not more than your income percentage. Just in case it is high, make sure you pay off the smaller loans in order to bring down your overall EMI. This will help in freeing up some part of your income so that you can repay your car loan.

Besides Car Loan EMI Calculator, you also have easy access to various other EMI calculators like Home Loan EMI Calculator, Bike Loan EMI Calculator, and Personal Loan EMI Calculator.


How to calculate interest on a loan#How #to #calculate #interest #on #a #loan


Calculate Loan Interest

How to calculate interest on a loan

How to calculate interest on a loan

The easiest way to calculate loan interest is with a calculator or spreadsheet, but you can also do it by hand if you prefer. We’ll cover each of those approaches on this page.

Technology makes quick work of the calculations, but when you do the math yourself (at least some of it) you notice details that can help you make better financial decisions.

Types of interest: it’s important to understand exactly how interest is charged, and that depends on the loan and your lender.

For example, credit cards often charge interest daily – so it pays to make your payment as soon as possible. Other lenders might calculate interest monthly or even annually. This detail is important because you need to use the right numbers for your calculations. Interest rates are usually quoted as an annual percentage rate (APR). If you pay interest monthly, you’ll need to convert that rate to a monthly rate by dividing by 12 for your calculations (for example, a 12% annual rate becomes a 1% monthly rate).

Calculators and Spreadsheets

If you want to do as little math as possible, there are two ways to take advantage of technology:

  • Spreadsheets like Microsoft Excel, Google Sheets, and others make it easy to build a model of your loan. See exactly how to calculate with a spreadsheet (with easy-to-follow steps). With the model built, you can easily see how different loans compare, and you can see things you’re your lifetime interest costs.
  • A loan amortization calculator does everything for you: it will calculate your monthly payment, show how much interest is in each payment, and show how much you pay down your balance every month. Copy and paste the output into a spreadsheet if you want to do more analysis.

How to Calculate Loan Interest Yourself

Don’t want to use a spreadsheet or calculator?

You can do it all by hand – or at least build a spreadsheet by hand – and you’ll become a pro at understanding interest expenses.

For standard home, auto, and student loans, the best way to do this is to build an amortization table. This table shows every payment, interest and principal amounts, and your remaining loan balance at any given time (just like a spreadsheet or a good calculator does). To calculate, you ll need to know a few important variables:

  • The interest rate
  • The length of time you ll borrow
  • The amount that you re paying interest on (known as the principal)
  • The monthly payment (see how to calculate payments below)

For a quick estimate of interest costs, a simple interest calculation can get you “close enough.”

Simple interest example: assume you borrow $100 at 6% for one year. How much interest will you pay?

Most loans aren t that simple. You repay over many years, and interest is charged every year, sometimes even compounding and causing your balance to grow.

Real-life example: assume you borrow $100,000 at 6% APR to be repaid monthly over 30 years. How much interest will you pay?

Assume this is a standard loan like a home loan.

Hint: the monthly payment is 599.55.

You’ll actually pay a different amount of interest every month – ideally less each month. These loans go through a process called amortization, which pays down your loan balance over time.

The table at the bottom of this page shows how your loan calculations might look; total interest over the first three payments is $1,498.50 ($500 $499.50 $499). To build that table yourself, use the steps below:

  1. Calculate the monthly loan payment (see how to calculate payments)
  2. Convert the annual rate to a monthly rate by dividing by 12 (6% annually divided by 12 months means a 0.5% monthly rate)
  3. Figure the monthly interest by multiplying the monthly rate by the loan balance at the start of the month (0.5% times $100,000 equals $500 for the first month)
  1. Subtract the interest costs from the monthly payment (and keep a running tally in an additional column if you like)
  2. Apply the remainder of the monthly payment to principal repayment (reduce your loan balance by the principal payment)
  3. Calculate your remaining loan balance
  4. Copy the remaining loan balance to the next line
  5. Repeat steps 2 through 8 until the loan is paid off

You’ll see that a portion of each payment goes towards your interest expense, while the rest pays down your loan balance. Payments in the early years mostly go towards your interest costs (this is especially true for long-term loans). Over time, the interest portion decreases, and you pay down the loan more quickly.

Helpful tips for calculation:

Calculate Credit Card Interest

With credit cards, the calculation is similar, but it can be more complicated. Your card issuer may use one of several different methods to calculate your interest charges and minimum payment. These calculations account for purchases and payments that occur throughout the month, and the card issuer’s approach to generating profits.

To see an example of how to calculate interest, payments, and debt payoff with a credit card yourself, see Calculate Credit Card Payments Costs.

Calculate Loan Interest Rates

If you want to calculate a loan’s interest rate – as opposed to interest costs – see How to Calculate Interest Rates.

Interest Expenses

Interest effectively raises the price of the things you buy, whether it s a new home, a car, or equipment for your business. In some cases, those interest costs are tax deductible – which is one more reason not to ignore them. In other cases, interest is simply the price you pay for using somebody else s money.

To understand your finances, it’s wise to calculate interest costs any time you borrow. This helps you compare the costs of different loans, and it’ll even help you evaluate big decisions (such as how much to spend on a house or automobile). You can compare lenders, choose between ​longer or shorter loan terms, and find out how much ​the interest rate really affects your total interest costs.