1. What is Loan Interest?

Total interest represents the total amount of money paid in interest over the life of a loan. It's the difference between the total payments made and the original principal amount borrowed.

2. How Does the Calculator Work?

The calculator uses the loan interest formula:

Where:

• \( n \) — Number of payment periods
• \( PMT \) — Payment amount per period
• \( P \) — Principal loan amount

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

3. Importance of Interest Calculation

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

4. Using the Calculator

Tips: Enter the number of payment periods (n), the payment amount per period (PMT), and the principal amount (P). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include compound interest?
A: This simple formula assumes fixed payments. For compound interest calculations, a more complex formula would be needed.

Q2: How does payment frequency affect the calculation?
A: The number of periods (n) should match the total number of payments over the loan term (e.g., 360 for a 30-year monthly loan).

Q3: What if my payments change over time?
A: This calculator assumes fixed payments. For variable-rate loans, you would need to calculate each period separately.

Q4: Why is my actual interest different?
A: This is a simplified calculation. Actual loans may have fees, payment timing differences, or compounding effects not accounted for here.

Q5: Can I use this for mortgage calculations?
A: Yes, but be aware that mortgages often have additional costs (insurance, taxes) not included in this basic interest calculation.