How is the amount of interest paid calculated

a lender uses the simple interest method, it’s easy to calculate the interest on your loan if you have the right information available.

Gather information like your principal loan amount, interest rate and total number of months or years that you’ll be paying the loan.

Calculate your total interest by using this formula: Principal Loan Amount x Interest Rate x Time (aka Number of Years in Term) = Interest.

If you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula works as follows:

$20,000 x .05 x 5 = $5,000 in interestnation:

explanation:

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