1. What is Loan Interest Calculation?

The loan interest calculation determines how much interest you'll pay over the life of a loan. The amortization table shows how each payment is split between principal and interest.

2. How Does the Calculator Work?

The calculator uses standard loan amortization formulas:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: Each payment has two parts - interest (based on current balance) and principal (the remainder). Over time, the interest portion decreases while the principal portion increases.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see the true cost of loans, plan prepayments, and compare loan options effectively.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (as percentage), and loan term in years. The calculator will show total interest, monthly payment, and full amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does early payment have more interest?
A: Interest is calculated on the current balance, which is highest at the start of the loan.

Q2: How can I reduce total interest paid?
A: Make extra principal payments, choose shorter terms, or negotiate lower rates.

Q3: What's the difference between simple and amortized loans?
A: Simple loans charge interest only on principal; amortized loans recalculate interest each period based on remaining balance.

Q4: Are there loans that don't amortize?
A: Yes, interest-only loans and balloon payment loans have different payment structures.

Q5: How does refinancing affect amortization?
A: Refinancing resets the amortization schedule, typically extending the loan term unless you maintain the same payoff date.