To calculate the interest amount per month, you need to divide the annual interest rate by 12 and then multiply the result by the loan principal. This calculation provides the monthly interest amount.
Here's the formula:
Monthly Interest = (Annual Rate / 12) * Principal
Explanation:
- Annual Rate: The yearly interest rate expressed as a decimal (e.g., 6% would be 0.06).
- Principal: The original loan amount or the current outstanding balance.
- Monthly Interest: The interest amount due each month.
Example:
Suppose you have a loan with:
- Principal: \$10,000
- Annual Interest Rate: 6% (0.06)
Then, the monthly interest calculation would be:
Monthly Interest = (0.06 / 12) * \$10,000 = 0.005 * \$10,000 = \$50
Therefore, the interest amount per month is \$50.
This formula is useful for understanding the interest portion of your monthly payments and tracking the cost of borrowing over time.
