How is total loan interest calculated?

Total interest is calculated by subtracting the original loan amount from the sum of all payments. Total Interest = (Monthly Payment × Number of Months) - Principal. This gives you the total cost of borrowing over the entire loan term.

Why do I pay so much interest on a mortgage?

Mortgages have long terms (15-30 years) and compound interest. Even at low rates, interest accumulates over decades. For example, a $300,000 mortgage at 6.5% for 30 years costs about $383,000 in interest—more than the home price!

How can I reduce total interest paid?

Several strategies reduce total interest: 1) Choose a shorter loan term, 2) Make extra principal payments, 3) Refinance at a lower rate, 4) Make biweekly payments instead of monthly (results in 13 payments/year), 5) Put more money down upfront.

What's the impact of a lower interest rate?

Even small rate differences have huge impacts over time. On a $300,000 30-year mortgage, reducing the rate from 7% to 6% saves about $70,000 in total interest. Always shop around for the best rate.

Total Loan Interest Calculator

Calculate the total interest you'll pay over the life of a loan. Understand the true cost of borrowing money.

Calculator

Result

Loan Amount: $0.00
Interest Rate: -
Loan Term: -
Monthly Payment: $0.00
Total of All Payments: $0.00
Total Interest: $0.00
Interest as % of Principal: 0.0%

Formula & Guide

Formula

I

Total Interest

Total Interest = (PMT × n) - P

Sum of payments minus principal

%

Interest Percentage

Interest % = (Total Interest / P) × 100

Interest as percentage of loan

Formula Variables

PMT

Monthly Payment

Fixed monthly payment amount

n

Term

Total number of monthly payments

P

Principal

Original loan amount

Step-by-Step Scenario

Example: 30-Year Mortgage

Loan Amount

$250,000

Interest Rate

7%

Term

30 years (360 months)

1

Calculate Monthly Payment

PMT = $1,663.26

2

Calculate Total Payments

$1,663.26 × 360 = $598,773.60

3

Calculate Total Interest

$598,773.60 - $250,000 = $348,773.60
That's 139.5% of the original loan!

$348,773.60

Additional Examples

15-Year Mortgage

Loan Amount: $250,000

Rate: 6.5%

Term: 15 years

Monthly Payment

$2,177.77

Total Interest

$141,999

30-Year Mortgage

Loan Amount: $250,000

Rate: 7%

Term: 30 years

Monthly Payment

$1,663.26

Total Interest

$348,774

Understanding Total Interest

Longer Terms Cost More

Extended loan terms result in significantly more total interest, even if monthly payments are lower.

Rate Impact

Small interest rate differences compound over time. A 0.5% lower rate can save thousands over the loan life.

Extra Payments Save

Making additional payments reduces principal faster, which decreases total interest paid over time.

Compare Total Cost

Don't just look at monthly payments. Compare total interest to understand the true cost of borrowing.

Important Notes

On long-term loans, total interest can exceed the original loan amount significantly.
Shorter loan terms result in less total interest, even with higher monthly payments.
Making extra payments reduces principal faster, which decreases total interest over time.
Compare total interest costs, not just monthly payments, when evaluating loan options.

Frequently Asked Questions

Common questions about loan interest.