1. What is the Total Interest Paid Formula?

The total interest paid formula calculates the total amount of interest paid over the entire tenure of a loan. It helps borrowers understand the true cost of borrowing beyond just the principal amount.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( I \) — Total interest paid (currency)
• \( EMI \) — Equated Monthly Installment (currency)
• \( N \) — Number of monthly payments
• \( P \) — Principal loan amount (currency)

Explanation: The formula calculates the total amount paid over the loan term (EMI × N) and subtracts the principal amount to determine the interest portion.

3. Importance of Total Interest Calculation

Details: Understanding total interest paid helps borrowers make informed decisions about loan products, compare different loan options, and plan their finances more effectively.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why calculate total interest paid?
A: It helps borrowers understand the true cost of credit and compare different loan offers more effectively.

Q2: Does this formula work for all types of loans?
A: This formula works for fixed-rate loans with constant EMI payments throughout the tenure.

Q3: What if I make extra payments?
A: Extra payments reduce the principal faster, which would decrease the total interest paid. This simple formula assumes no extra payments.

Q4: How does loan tenure affect total interest?
A: Longer loan tenures typically result in higher total interest paid, even if the EMI amount is lower.

Q5: Can this formula be used for variable rate loans?
A: No, this formula is designed for fixed-rate loans. Variable rate loans require more complex calculations as EMI amounts may change.