Loan Interest Calculator
Calculate loan interest, monthly payments, and total costs with customizable payment and compounding frequencies
Calculate Loan Interest
Principal amount to be borrowed
Duration of the loan repayment
Annual percentage rate (APR)
How often you make payments
How often interest is calculated and added to the balance
Loan Interest Results
Periodic Rate: 0.500%
Total Periods: 120
Monthly Equivalent: $111.02
Interest vs Principal: 33.2%
Interest Analysis
Example Calculation
Car Loan Example
Loan Amount: $10,000
Term: 10 years
Interest Rate: 6% annually
Payment Frequency: Monthly
Compounding: Monthly
Results
Monthly Payment: $111.02
Total Payment: $13,322.46
Total Interest: $3,322.46
Interest Percentage: 33.2% of total payments
💡 Interest Calculation Tips
Payment Frequency
More frequent payments can reduce total interest paid
Compounding Effect
More frequent compounding increases total interest cost
Rate Shopping
Compare rates from multiple lenders for the best deal
Early Payments
Extra principal payments reduce total interest significantly
Interest Basics
Understanding Loan Interest
How Interest Works
- •Simple Interest: Calculated only on the principal amount
- •Compound Interest: Calculated on principal plus accumulated interest
- •Amortization: Each payment includes both principal and interest
- •Payment Frequency: More frequent payments reduce total interest
Interest Rate Factors
- •Credit Score: Higher scores get better rates
- •Loan Term: Shorter terms usually have lower rates
- •Down Payment: Larger down payments reduce risk and rates
- •Economic Conditions: Market rates affect all loan pricing
Loan Interest Formula
Periodic Payment Formula
P: Periodic payment amount
A: Loan principal (amount borrowed)
i: Periodic interest rate (annual rate ÷ payment frequency)
n: Total number of payments (years × payment frequency)
Total Interest Formula
Where P is the periodic payment, n is the number of payments, and A is the loan amount.
Frequently Asked Questions
What's the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal amount. APR (Annual Percentage Rate) includes the interest rate plus additional fees and costs, providing the true cost of borrowing.
How does payment frequency affect total interest?
Making more frequent payments (like bi-weekly instead of monthly) reduces the principal balance faster, which means less interest accrues over time, saving you money on the total loan cost.
What is compounding frequency?
Compounding frequency is how often interest is calculated and added to the loan balance. More frequent compounding (daily vs. annually) results in slightly higher total interest costs.
Should I choose a shorter or longer loan term?
Shorter terms have higher monthly payments but significantly less total interest. Longer terms have lower monthly payments but cost more overall. Choose based on your budget and financial goals.