Simple interest loan calculator

How simple interest works on an installment loan

With simple interest, you pay interest only on the principal still owed. Each payment first covers the interest accrued since the last payment, and the rest reduces the principal. That is why paying early or extra lowers your cost: less principal means less interest in every later month.

This is different from interest that compounds on unpaid interest, and from flat-rate loans, where interest is figured on the original amount for the whole term and costs far more.

Daily interest and timing

Some lenders accrue interest daily using the annual rate divided by 365. A payment made a few days late accrues a few days of extra interest, and one made early accrues less. The effect is small per payment but useful to know if your payoff figure is off by a few dollars.

$18,000 at 9% by loan length

Borrowing $18,000 at 9% over 5 years costs $373.65 a month and $4,419 in interest, $22,419 in total. Shorter terms raise the payment but cut the interest, and longer terms do the reverse. The table shows the trade-off across common terms.

How your rate changes the cost

Personal loan rates vary widely with credit score, from the mid single digits for strong borrowers to 30% or more for weak credit. On $18,000 over 5 years, moving from 9% to 12% adds $1,605 in interest.

Where the interest goes

In the first year of this $18,000 loan you pay $1,499 in interest, 33% of everything you pay that year. Interest is calculated on the balance each month, so it shrinks as you pay the loan down.

How much can you borrow for a given payment?

Working backwards at 9% over 5 years, here is the loan size each monthly payment supports.

When is half of a $18,000 loan repaid?

With a $373.65 payment, the balance falls below half ($9,000) after 34 payments, about 2.8 years into a 5 years loan. Because interest is highest at the start, the second half of the loan is paid down much faster than the first.