How Do You Calculate Interest?


Quick Answer

To calculate interest, multiply the periodic interest rate by the principle amount. For example, if you borrowed $1000 with an interest rate of 10 percent, in a year your interest paid is $100.

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Full Answer

  1. Find your interest rate

    Find your interest rate in your financial records for the product for which you are calculating interest.

  2. Multiply the interest rate by the principle amount

    For example: $1000 in principle times 0.1 (10 percent periodic interest rate) equals $100.

  3. Confirm your annual rate

    Once you determine the amount of interest, check with your bank or other institution to confirm that your rate does not vary.

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