Loan Interest Calculator
Analyze total loan interest charges, front-loaded early interest payments, and the lifetime interest-to-principal cost ratio.
Amortization Interest Allocation Formula
Monthly Interest Charge = Remaining Balance × (APR / 12) | Principal Paid = Monthly Payment − Monthly Interest Charge- Remaining Balance: Principal remaining at the beginning of each billing month.
- Front-Loading Effect: Early installments consist primarily of interest because the starting principal is at its maximum.
- Interest-to-Principal Ratio: (Total Interest Paid / Principal) × 100.
Step-by-Step Worked Example
Calculation Steps:
How to Use This Calculator
Assumptions & Limitations
- Installment loans follow standard declining-balance amortization accounting rules.
Frequently Asked Questions
Why do I pay so much more interest in the first year of a loan?
Interest is calculated on the remaining balance. In Year 1, your balance is highest, generating large interest charges. As you pay down principal, future interest charges drop dramatically.
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