1. What is Monthly Loan Interest?

Monthly loan interest is the amount of interest that accrues on a loan principal each month. It's calculated based on the principal amount and annual interest rate, divided by 12 months.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal loan amount (dollars)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula converts the annual rate to a monthly rate by dividing by 12, then applies it to the principal.

3. Importance of Interest Calculation

Details: Understanding monthly interest helps borrowers plan repayments, compare loan options, and understand the true cost of borrowing.

4. Using the Calculator

Tips: Enter the principal amount in dollars and annual interest rate as a percentage (e.g., 5 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as amortized interest?
A: No, this calculates simple monthly interest. Amortized loans have decreasing interest as principal is paid down.

Q2: Does this include compounding?
A: No, this is simple interest calculation. Compounding would require knowing the payment frequency.

Q3: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while interest rate is just the cost of borrowing principal.

Q4: How does loan term affect total interest?
A: Longer terms mean more interest payments, even if monthly interest is the same.

Q5: Can I use this for credit card interest?
A: Credit cards typically use daily compounding, so this would only provide a rough estimate.