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Total Interest Formula:
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Total Interest Paid represents the additional amount paid beyond the principal amount when repaying a loan through EMIs (Equated Monthly Installments). It shows the true cost of borrowing money over the loan tenure.
The calculator uses the formula:
Where:
Explanation: The formula calculates the difference between the total amount paid (EMI × number of payments) and the original principal amount borrowed.
Details: Understanding the total interest paid helps borrowers make informed decisions about loan options, compare different loan offers, and plan their finances more effectively by knowing the true cost of credit.
Tips: Enter the EMI amount in your currency, the total number of monthly payments, and the principal loan amount. All values must be positive numbers.
Q1: Why is knowing total interest paid important?
A: It helps you understand the true cost of a loan and compare different borrowing options to make the most economical choice.
Q2: Does this calculation work for all types of loans?
A: Yes, this formula works for any loan with fixed monthly payments, including home loans, car loans, and personal loans.
Q3: How can I reduce my total interest paid?
A: You can reduce total interest by making additional principal payments, choosing a shorter loan term, or negotiating a lower interest rate.
Q4: Is the total interest the same as APR?
A: No, APR (Annual Percentage Rate) includes both interest and other loan fees, while total interest represents only the interest portion of your payments.
Q5: What if my EMI changes during the loan term?
A: This calculator assumes fixed EMIs throughout the loan term. For variable rate loans, the calculation would need to be done separately for each payment period.