Finance Calculator
Loan Interest Calculator
Estimate the total interest payable on a business loan. Enter your principal, annual interest rate, and loan term to see the full cost breakdown including monthly repayments and total repayable.
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How is loan interest calculated?
Most business loans use a reducing-balance interest calculation. This means interest is charged on the outstanding balance, which decreases with each repayment. The standard annuity formula is used to determine fixed monthly repayments.
The total interest is simply the difference between what you repay in total and the original loan amount. A longer term means lower monthly payments but higher total interest. A higher rate increases both.
Monthly Rate = Annual Rate / 12
Monthly Payment = P — r — (1+r)^n / ((1+r)^n - 1)
Total Repayable = Monthly Payment — Number of Months
Total Interest = Total Repayable - Principal
Where P is the loan principal, r is the monthly interest rate (as a decimal), and n is the total number of monthly payments.
Assumptions and caveats
- •This calculator assumes a fixed interest rate for the full term. Variable-rate loans will produce different outcomes.
- •Repayments are assumed to be monthly and equal (annuity method). Interest-only or bullet repayment structures are not modelled here.
- •Arrangement fees, early repayment charges, and other costs are not included in this estimate.
- •Results are indicative only. Contact a lender for a formal quotation.
Frequently asked questions
For a standard repayment loan, the monthly payment is calculated using the annuity formula. Total interest is the difference between total repayments and the original principal.
A flat rate applies to the original loan amount for the full term, regardless of repayments made. APR reflects the true cost including the reducing balance effect and is the standard comparison measure.
On a reducing-balance loan, early repayment reduces the outstanding balance and therefore the interest charged. Some lenders apply early repayment charges. Terms vary by provider.
The main factors are the loan amount, interest rate, term length, and repayment structure. Higher rates, larger loans, and longer terms all increase total interest payable.
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