1. What is Total Interest?

Total Interest represents the total amount of money you will pay in interest over the life of a loan. It's the difference between the total amount repaid and the original principal borrowed.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( n \) — Number of payment periods
• \( PMT \) — Regular payment amount
• \( P \) — Original principal amount

Explanation: This formula calculates the total cost of borrowing by multiplying the number of payments by the payment amount, then subtracting the original loan amount.

3. Importance of Calculating Total Interest

Details: Understanding total interest helps borrowers compare loan options, make informed financial decisions, and see the true cost of borrowing beyond just the monthly payment.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include compound interest?
A: No, this is a simple interest calculation. For compound interest, more complex formulas are needed.

Q2: Why is my total interest higher than expected?
A: Longer loan terms or higher interest rates result in more total interest paid, even if monthly payments seem affordable.

Q3: How can I reduce total interest?
A: Make larger payments, choose shorter loan terms, or secure lower interest rates to reduce total interest costs.

Q4: Does this work for all loan types?
A: This works best for fixed-rate loans with consistent payments. Adjustable-rate loans require more complex calculations.

Q5: Is this the same as APR?
A: No, APR (Annual Percentage Rate) includes fees and other costs, while this calculation shows only the interest portion.