1. What is Monthly Loan Interest?

Monthly interest is the amount charged each month for borrowing money, calculated as a portion of the annual interest rate applied to the current loan balance.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• Balance — Current loan amount (principal)
• Annual Rate — Yearly interest rate (as percentage)
• 12 — Number of months in a year

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

3. Importance of Calculating Monthly Interest

Details: Understanding monthly interest helps borrowers track how much of their payment goes toward interest vs. principal, plan repayments, and compare loan options.

4. Using the Calculator

Tips: Enter the current loan balance and annual interest rate. The calculator will show the interest portion of your next payment if no principal is paid down.

5. Frequently Asked Questions (FAQ)

Q1: Does this calculate compound interest?
A: No, this calculates simple monthly interest. For compound interest, you'd need to account for interest on previously accrued interest.

Q2: Why does my actual payment include more than just interest?
A: Most loan payments include both principal and interest. This calculator shows only the interest portion.

Q3: How does extra principal payment affect monthly interest?
A: Paying extra principal reduces your balance faster, which decreases future interest calculations.

Q4: Is the interest rate entered as decimal or percentage?
A: Enter as percentage (e.g., 5.25 for 5.25%). The calculator converts it to decimal for calculation.

Q5: Does this work for credit cards and mortgages?
A: Yes, though credit cards typically use daily interest calculations. For mortgages, this shows the interest portion of your next payment.