Identify the principal loan amount
Identify the annual interest rate
Determine the loan term
Convert the annual interest rate to a monthly rate by dividing by 12
Use the simple interest formula: Interest = Principal × Rate × Time
Use the monthly interest formula: Monthly Interest = Remaining Principal × Monthly Rate
For amortized loans, calculate each payment using the loan amortization formula
Subtract the interest portion from each payment to find the principal portion
Update the remaining balance after each payment
Multiply the monthly payment by the total number of payments to find total repayment
Subtract the principal amount from total repayment to find total interest paid
Include any fees or charges if you want the full borrowing cost
Use a loan calculator or amortization schedule to verify the result