# Interest Calculations

Interest is calculated in a number of different ways. The four used by this plugin are: fixed, simple, compound and amortization.

Also on this page: Repayments.

Note: there are other ways of calculating interest and repayments. If the way you want to do it isn’t listed get in contact.

### Variables Used

Principle – The amount you want to borrow

Interest – The percentage divided by 100. for example: 2% = 2/100

Term = the number of periods to which the Interest Rate applies. For example: 5 years or 28 days

## Fixed Interest

This is the simplest one of all. The formula is:

*Total to Pay = Principle x (1 + Interest)*

For example: a loan of $100 with an interest rate of 5% returns:

$100 x (1 + 0.05) = $100 x 1.05 = $105

It doesn’t matter how long the loan is taken out for, the interest is always the same.

Try It Yourself:

## Simple Interest

This interest calculation takes into account the time over which the loan is taken. The formula is:

*Total to Pay = Principle x (1 + Interest x Term)*

For example: a loan of $100 with an annual interest rate of 5% for 4 years returns:

$100 x (1 + 0.05 x 4) = $100 x 1.20 = $120

Try it yourself:

## Compound Interest

This interest calculation uses the previous total to calculate the new total over the term of the loan.

*Total to Pay = Principle x (1 + Interest) ^{Term}*

For example: a loan of $100 with an annual interest rate of 5% for 4 years returns:

$100 x (1 + 0.05)^{4} = $100 x 1.05^{4} = $121.55

Try it yourself:

## Amortization

This is used to calculated repayments where the amount of interest reduces as the loan is repaid.

*Payment = rate(Present Value) / 1 – (1 + rate) ^{-number of periods}*

It’s complicated. More about amortization repayments

Try it yourself:

## Repayments

To calculate the repayments on fixed, simple and compound interest all you have to do is divide the total to pay by the number of repayments.

So for example, a 4 year Loan repaid monthly would have 48 payments.

Amortization works differently. More about amortization repayments