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what is the formula for a simple interest loan. To calculate simple interest use this formula. These are the principal amount of the loan the interest rate and the loan term.
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For the purpose of our example the loan details are as follows. R Rate of Interest per year in decimal. The payment on a loan can also be calculated by dividing the original loan amount PV by the present value interest factor of an annuity based on the term and interest rate of the loan.
The formula for finding simple interest on a loan is.
Total Simple Interest for 5 years 2500. Multiply the principal by the interest rate by the loan duration. With installment loans youll generally have a fixed repayment term. I P R T.
