Home
Back
Monthly Interest Formula:
| From: | To: |
Monthly interest calculation determines the interest amount due each month on a personal loan. It's based on the principal amount and the annual interest rate, divided by 12 to get the monthly rate.
The calculator uses the monthly interest formula:
Where:
Explanation: This formula calculates the interest portion of a monthly payment for a simple interest loan, where interest is calculated only on the principal amount.
Details: Understanding monthly interest helps borrowers budget for loan payments, compare different loan offers, and understand how much of their payment goes toward interest versus principal reduction.
Tips: Enter the principal amount in your local currency and the annual interest rate as a decimal (e.g., 5% = 0.05). Both values must be positive numbers.
Q1: Is this calculation for simple or compound interest?
A: This calculator uses simple interest calculation, where interest is calculated only on the principal amount each month.
Q2: How does this differ from APR calculations?
A: APR includes additional fees and costs associated with the loan, while this calculation only considers the basic interest rate applied to the principal.
Q3: Can I use this for mortgage or car loan calculations?
A: While the basic principle is similar, mortgages and car loans often use amortization formulas that account for changing principal balances over time.
Q4: What if my loan has compound interest?
A: For compound interest loans, the calculation is more complex as interest is calculated on both principal and accumulated interest.
Q5: How accurate is this calculation for real-world loans?
A: This provides a basic estimate. Actual loan payments may include additional fees, insurance, or other charges not accounted for in this simple calculation.