1. What is Loan Interest?

Total interest is the total amount of money paid in interest over the life of a loan. It represents the cost of borrowing money and is calculated as the difference between all payments made and the original principal amount.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( n \) — Total number of payments
• \( PMT \) — Payment amount per period
• \( P \) — Original principal loan amount

Explanation: This formula calculates the total amount paid over the life of the loan and subtracts the original principal to determine just the interest portion.

3. Importance of Interest Calculation

Details: Understanding total interest helps borrowers compare loan options, evaluate the true cost of borrowing, and make informed financial decisions.

4. Using the Calculator

Tips: Enter the total number of payments, payment amount, and original principal. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for any type of loan?
A: This works for any fixed payment loan (mortgages, car loans, etc.) where payments are equal throughout the term.

Q2: How does this differ from simple interest?
A: This calculates cumulative interest for amortizing loans, while simple interest is typically calculated per period.

Q3: Why is my total interest higher than expected?
A: Longer loan terms and higher interest rates result in more total interest paid, even if monthly payments seem affordable.

Q4: Can I reduce my total interest paid?
A: Yes, by making extra principal payments, choosing shorter loan terms, or negotiating lower interest rates.

Q5: Does this include fees and other charges?
A: No, this calculates only the interest portion of payments. Other fees would be in addition to this amount.