Convert the annual interest rate to a monthly rate by dividing by 12
Use the formula: Monthly Interest = Principal × Monthly Interest Rate
If the annual rate is given as a percentage, convert it to a decimal first
Example: 6% annual rate = 0.06 ÷ 12 = 0.005 monthly rate
Example: Monthly Interest = 1,000 × 0.005 = 5
For compound interest, use the balance at the start of the month as the principal
For simple interest, use the original principal each month
If needed, calculate monthly payment interest separately from principal repayment