1. What is Loan Interest?

Loan interest represents the cost of borrowing money, calculated as the difference between total payments made and the original loan amount. It's what lenders charge for providing funds.

2. How Does the Calculator Work?

The calculator uses the simple loan interest formula:

Where:

• \( PMT \) — Regular payment amount (USD)
• \( n \) — Total number of payments
• \( PV \) — Original loan amount (USD)

Explanation: This formula calculates the total interest paid over the life of a loan by subtracting the principal from the total of all payments.

3. Importance of Interest Calculation

Details: Understanding total interest helps borrowers compare loan options, plan finances, and make informed decisions about borrowing and repayment strategies.

4. Using the Calculator

Tips: Enter the regular payment amount in USD, total number of payments, and original loan amount in USD. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for any type of loan?
A: This calculates simple interest for fixed payment loans. For amortizing loans with changing payments, more complex formulas are needed.

Q2: How does payment frequency affect interest?
A: More frequent payments (e.g., weekly vs. monthly) can reduce total interest by paying principal faster.

Q3: What's the difference between interest and APR?
A: APR includes fees and other loan costs, while this calculator shows only the interest portion.

Q4: Can I use this for mortgage calculations?
A: For simple estimates yes, but mortgages typically use amortization formulas that account for changing principal.

Q5: How can I reduce total interest paid?
A: Make larger payments, pay more frequently, or choose shorter loan terms to minimize interest costs.