How To Calculate Interest On A Loan
Need to take out a loan and you want to know how to calculate interest on a loan? Well, we're going to tell you how to do this. Basically, it's all math and simple equations. We will also tell you how to calculate simple interest on a loan.
Things you'll need:
- Pen/pencil and paper
- Get some paper and a pen or pencil. If you've been to school, you should know what an equation is. In this case, the equation is I = PRT. "I" stands for Interest, "P" stands for Principle, which is also the amount of money you are taking out for loan, '"R" is the rate of interest and "T" stands for time. In this case, you are solving for 'I.' Now, write the equation onto a piece of paper. Make sure you know how much money you borrowed for loan, what the interest rate is and how much time you plan to take to pay off the loan.
- Replace the variables for actual values. In the equation, replace "P" with how much money you took out of the bank, replace "R" with the current interest rate and replace "T" for the amount of time you want to take to pay it off. For example, if P = 500, R = 10 percent and T = five years, your equation would look like this: I = 500 x .1 x 5.
- Get a calculator or solve by hand. You can use a calculator or simply solve by hand for this step. Simply solve for 'I.' In other words, multiply everything out and you'll get your end result. To the example mentioned earlier, 500 x .1 is equal to 50. Fifty x 5 equals 250. Therefore, $250 is the amount of interest; a total of $750 will need to be paid off. This is because this is the amount of interest that'll have to be paid. You'll need to add this to your principle. Again, this is just an example. You'll need to replace the variables in the equation with your own values.