1. What is Monthly Loan Interest?

Monthly loan interest is the amount of interest charged each month on an outstanding loan balance. It represents the cost of borrowing money and is calculated based on the principal amount and annual interest rate.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal amount (USD)
• \( r \) — Annual interest rate (in decimal form)

Explanation: The formula converts the annual interest rate to a monthly rate by dividing by 12, then multiplies by the principal amount to determine the monthly interest charge.

3. Importance of Monthly Interest Calculation

Details: Understanding monthly interest helps borrowers budget for loan payments, compare different loan offers, and make informed financial decisions about borrowing.

4. Using the Calculator

Tips: Enter the principal amount in USD and the annual interest rate in decimal form (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert percentage to decimal?
A: Divide the percentage by 100. For example, 5% becomes 0.05, 7.25% becomes 0.0725.

Q2: Does this calculation include compound interest?
A: No, this formula calculates simple monthly interest. Compound interest would require a more complex calculation.

Q3: Is this calculation for the first month only?
A: This calculates interest for one month based on the current principal. For subsequent months, the calculation may change if principal is reduced.

Q4: What's the difference between monthly and annual interest?
A: Monthly interest is 1/12th of the annual interest. A 12% annual rate equals 1% monthly rate.

Q5: Can I use this for credit card interest?
A: This provides a basic estimate, but credit cards often use daily compounding which may result in slightly different amounts.