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How do you calculate interest on loans?

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Quick Answer

Loan interest rates can be calculated with a loan amortization calculator and by knowing whether interest rates are fixed or variable, according to About.com. These methods can help borrowers understand their monthly payments, how much of the payment consists of interest, and how much future payments are.

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Full Answer

Loan amortization calculators use the full loan amount, current interest rate, the day the loan starts and the down payment to determine how much the borrower pays in interest, notes About.com. Certain amortization calculators may not work on certain types of loans, such as revolving loans or credit card loans. In addition to different interest rates, credit card issuers may also have different annual percentage rates for cash advances, purchases and balance transfers.

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