Data Source and Methodology

Calculations follow the Consumer Financial Protection Bureau's definition of simple interest: \( I = P \times r \times t \), where \(P\) is principal, \(r\) is the annual nominal rate, and \(t\) is the term in years. The calculator divides total principal and interest evenly across the number of payments determined by your selected frequency. No compounding, fees, or penalty charges are added.

Formulas Used

Worked Example

Consider a $10,000 loan at 8% simple interest for 3 years with monthly payments.

1. Convert the term: \( t = 3 \) years, payments per year \( f = 12 \) ⇒ \( n = 36 \) payments.
2. Total interest: \( I = 10{,}000 \times 0.08 \times 3 = 2{,}400 \).
3. Total to repay: \( P + I = 12{,}400 \).
4. Monthly payment: \( 12{,}400 / 36 ≈ 344.44 \).
5. Each payment includes \( 10{,}000 / 36 ≈ 277.78 \) principal and \( 2{,}400 / 36 ≈ 66.67 \) interest. The final payment adjusts by a few cents to match rounding.

Frequently Asked Questions

Why doesn’t the interest change with payment frequency?

Simple interest grows linearly with time. Paying weekly or biweekly simply divides the fixed total interest into smaller pieces, while the sum stays the same.

How accurate is the payoff date?

The payoff date assumes payments are made at consistent intervals with no delays. Lender rounding, holidays, or grace periods can shift it slightly.

Can I include fees or taxes?

This tool focuses on principal and stated APR. To add fees, increase the loan amount or adjust the APR to reflect the true cost.

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Total interest: \( I = P \times r \times t \) Number of payments: \( n = f \times t \) where \(f\) is payments per year. Per-payment amount: \( \text{Payment} = \dfrac{P + I}{n} \) Per-payment split: \( \Delta P = \dfrac{P}{n},\; \Delta I = \dfrac{I}{n} \) Total repaid: \( \text{Total} = P + I \)