Loan Interest Cost Calculator

Total interest is the difference between what you repay and what you borrowed. First, calculate the monthly payment using M = P × [r(1+r)^n] / [(1+r)^n − 1]. Then: Total Interest = (M × n) − P. For a $30,000 loan at 9% APR over 5 years: M = $622.75, total repaid = $37,365, and total interest = $7,365. This means 19.6% of your total payments go to interest alone.

Three strategies to minimize interest: 1) Choose a shorter term — a 3-year term vs. 5-year term on $30,000 at 9% saves $4,209 in interest. 2) Make extra principal payments — even $50/month extra significantly reduces the balance faster. 3) Refinance to a lower rate — dropping from 9% to 6% on the same loan saves $2,518 in interest over 5 years.

Three different formulas calculate "loan interest" and using the wrong one can mis-quote your cost by hundreds of dollars. Simple interest (Interest = P × r × t) charges only on the original principal — used by most car loans, short-term personal loans, and most US student loans. A $10,000 simple-interest loan at 6% for 3 years costs $1,800 in interest. Compound interest charges on principal plus accrued unpaid interest — common on credit cards (daily compounding) and unpaid student-loan interest after periods of deferment. The same $10,000 at 6% compounded monthly for 3 years costs ~$1,968 — 9% more than simple. Amortizing interest applies the rate monthly to a declining balance because each payment includes principal reduction; the resulting "total interest" depends on the schedule, not just the rate. For an apples-to-apples comparison always recompute total interest using the actual repayment schedule, not a simple-interest shortcut.